UNIVERSITY 

OF  CALIFORNIA 

LOS  ANGELES 


SCHOOL  OF  LAW 
LIBRARY 


I 


THE  LAW  OF 

BUILDING  ASSOCIATIONS 


THE    LAW 


OF 


BUILDING  ASSOCIATIONS: 


BEING  A  TREATISE 


UPON     THE     PRINCIPLES     OF     LAW    APPLICABLE     TO     MUTUAL    AND 

CO-OPERATIVE  BUILDING,  HOMESTEAD,  SAVING,  ACCUMULATING, 

LOAN     AND     FUND     ASSOCIATIONS,     BENEFIT     BUILDING 

SOCIETIES,     S.C.,     IN    TELE    UNITED    STATES. 


BY 

G.  A.   ENDLICH. 


JERSEY    CITY: 

FREDERICK  D.  LINN  &  CO. 
1886. 


Entered  according  to  Act  of  Congress,  In  the  year  1882,  by 

QUSTAV  A.  ENDLICH, 
In  the  office  of  the  Librarian  of  Congress,  at  Wnshington. 


TO 

GEOEGE  F.  BAEE,  ESQ., 

OF  READING,  PA., 

EN  CORDIAL,  ACKNOWLEDGMENT 

OF 

CIS  INTEGRITY  AS  A  MAN,  HIS  KINDNESS  AS  A  FR.KNt, 

AND  HIS  GENIUS  AS  A  LAWYER, 

THIS  WORK 

IS  DEDICATED. 


ADDENDA. 


To  Note  3,  page  63,  add— 

Berlin  Building  and  Loan  Association  v.  Clifford,  3  Stew.  482  (sheriff's 
fees  on  sale,  under  second  mortgage,  to  be  deducted  from  proceeds). 
Hoboken  Building  Association  v.  Martin,  2  Beas.  428  (misnaming  cor- 
poration in  contract ;  misnomer  in  bill  amendable  at  bearing ;  failure  to 
elect  officers  no  dissolution ;  premature  dissolution ;  loans ;  compromise). 

To  Note  2,  page  83,  add- 
Swift  et  ux.  v.  The  Allegheny  Building  and  Loan  Association,  82  Pa.  St. 
142  (tci.fa.  on  mortgage;  allegations  of  default  in  writ;  pleading). 


PREFACE. 

» 

In  preparing  the  present  treatise,  it  has  been  my 
endeavor  to  secure  a  statement  of  the  entire  law 
applicable  to  Building  Associations. 

I  have  collected  the  authorities  in  all  the  States  of 
the  Union,  and  the  decisions  of  the  English  Courts  so 
far  as  they  appeared  pertinent  to  the  system  of  Build- 
ing Associations  adopted  in  this  country.  From  them 
all,  I  have  labored  to  construct  a  work  of  general  and 
particular  usefulness,  aiming  at  the  elaboration  of 
fundamental  principles  of  universal  applicability,  as 
well  as  the  statement,  with  precision  and  simplicity,  of 
the  variances  noticeable  under  the  laws  and  decisions 
of  the  several  States. 

In  discussing  the  principles,  and  reviewing  the 
authorities,  I  have  endeavored  to  give,  in  its  proper 
connection,  every  important  case  as  fully  as  possible, 
with  its  facts,  contentions,  and  conclusion.  I  have 
been  particularly  careful  to  do  this,  with  a  view  to 
perfect  openness,  where  I  have  sought  to  make  the 
cases  cited  the  basis  of  some  general  proposition,  not, 
perhaps,  in  them  enunciated  with  the  directness  which 
a  mere  reference  to  the  case  might  lead  the  reader  to 

assume.     In  studying  these  cases,  in  all  their  bearings, 

(vii) 


Vlll  PREFACE. 

I  have  spared  neither  pains  nor  labor.  I  am  conscious 
of  no  desire  to  have  any  statement  I  may  have  made 
taken  upon  faith.  But,  whilst  I  do  not,  in  any  degree, 
rely  upon  the  generosity  of  the  learned  reader,  I  think 
that  I  may  count  upon  his  fairness  and  candor.  I 
think  I  may  expect  that,  where  his  judgment  is  in 
suspense  between  his  reading  of  an  authority  and  mine, 
between  his  interpretation  of  certain  words  used  by  a 
Court,  or  his  understanding  of  the  relation  of  several 
decisions  to  one  another,  and  mine,  the  benefit  of  a 
doubt  should  be  given  to  that  acceptation  which  is  the 
deliberate  result  of  the  patient  and  dispassionate  study 
of  scores  of  similar  cases,  and  of  the  familiarity  it  gives 
with  thoughts  and  phrases  and  relations  innumerably 
recurring. 

I  have,  however,  striven  for  completeness  in  yet 
another  direction, — in  touching  upon  and  stating  the 
law  concerning  all  obvious  matters  involved  in  the 
management  and  business,  the  internal  and  external 
relations  of  Building  Associations.  My  purpose  in 
doing  so,  was  to  render  the  treatise  not  only  useful  to 
the  profession,  but  also,  in  a  measure,  a  compendium  in 
the  hands  of  laymen  interested  in  and  occupied  with 
the  affairs  of  these  institutions.  In  this  endeavor,  I 
have  frequently  been  obliged  to  trench  upon  branches 
of  the  law  not  exclusively  belonging  to  Building  Asso- 
ciations,— the  general  law  of  corporations,  of  agency,  of 
usury,  <fec.  Cases  upon  these  and  like  subjects,  to 


PREFACE.  li 


which  Building  Associations  are  parties,  have  been 
decided  and  constantly  arise,  and  a  succinct  statement 
of  the  principles  governing  in  such  matters  appeared 
to  me  indispensable,  not  only  in  order  to  preserve  a 
proper  sequence  and  unity  of  treatment,  but,  more 
particularly,  to  inform  the  general  understanding  of 
the  subject,  and  assist  laymen  in  details  of  too  frequent 
recurrence  or  too  trifling  importance  to  require  the  aid 
of  a  lawyer. 

It  is  obvious  that  it  would  have  been  impossible  for 
me  to  devote  the  same  time  and  study,  in  proportion,  to 
these,  however  numerous,  still  merely  incidental  points 
as  to  those  involved  in  the  main  purpose  of  the  work, 
which  is  distinctively  a  treatise  upon  Building  Associa- 
tions, and  not  upon  corporation  law  in  general,  nor 
upon  any  other  independent  branch  of  jurisprudence. 
I  have,  therefore,  as  a  rule,  confined  myself,  in  my 
statements  concerning  general  or  incidental  matters,  to 
the  doctrines  laid  down  in  text-books.  I  have  referred 
the  reader  to  them,  and,  where  I  thought  it  advisable 
for  the  convenience  of  the  practitioner  who  may  not 
have  immediate  access  to  the  text-book  quoted,  or  who 
may  desire  a  reference  to  decisions  in  his  own  State,  I 
have  enumerated  the  authorities  as  cited  by  the  writers 
in  support  of  their  propositions. 

In  the  second  chapter  I  have  attempted  to  collect  the 
laws  in  force  in  every  State,  touching  the  whole  matter 
of  Building  Associations,  and  have  given,  in  one  note 


X  PREFACE. 

at  the  beginning  of  each  section,  a  list  of  the  decisions* 
in  that  particular  State,  with  a  brief  indication  of  the 
subjects  touched  upon  by  each,  thus  furnishing  a  sort 
of  digest  of  the  law  of  Building  Associations  for  each 
State.  The  collection  of  the  statutes  was,  in  many 
instances,  a  work  of  great  labor  and  difficulty,  and  one 
which  I  cannot  hope  to  have  accomplished  to  perfec- 
tion; but,  such  as  it  is,  it  cannot  fail  to  be  of  service  for 
purposes  of  convenient  reference  and  comparison.  I 
have,  in  all  instances,  tried  to  retain  the  exact  wording 
of  the  statutes. 

I  may  add,  that  I  cordially  invite  any  suggestions 
from  gentlemen  of  the  profession,  which  may  tend 
towards  remedying,  in  future  editions,  the  imperfec- 
tions and  crudities  which,  in  the  nature  of  the  case, 
attach  to  a  work  upon  a  new  subject  in  the  literature 

of  jurisprudence. 

G.  A.  K 
BEADING,  Pa., 

July  1st,  1882. 


CONTENTS. 


TABLE  OP  ABBREVIATIONS  OP  REPORTS  CITED xiiii 

TABLE  OF  CASES  CITED xxix 

TABLE  OF  DEFENDANTS  IN  CASES  IN  WHICH  BUILDING  ASSOCIATIONS 

ARF,  PLAINTIFFS Iv 

ADDENDA lix 

CHAPTER  L 

INTRODUCTORY. 

Introduction  of  the  subject  of  the  present  treatise,  §§  1-3. 
Early  history  of  building  associations,  \  4. 

Account  of  the  Greenwich  Union  Building  Association,  founded  1809,  \  5. 
Growth  of  building  associations  in  America,  \  6. 

Primary  design  and  general  description  of  the  operation  of  the  building  asso- 
ciation scheme,  \\  7-11. 

Terminology  of  building  associations,  \\  12-15. 

(pp.  1-13.) 

CHAPTER  IL 

STATUTORY  PROVISIONS  OP  THE  SEVERAL  STATES  OP   THE   UNIOHV 

General  observations,  \\  16-17. 

Alabama,  \  18. 

California,  \  19. 

Illinois,  \  20. 

Indiana,  \  21. 

Iowa,  g  22. 

Kansas,  \  23. 

Maryland,  \  24. 

Massachusetts,  \  25. 

Michigan,  \  26. 

Minnesota,  §  27. 

Missouri,  \  28. 

Nebraska,  \  29. 

New  Jersey,  \  30. 

New  York,  \  31. 


xii  CONTENTS. 

North  Carolina,  J  32. 
Ohio,  |  33. 
lYimsylvania,  J  34. 
Virginia,  $  35. 
West  Virginia,  5  36. 
Wisconsin,  §  37. 

States  in  which  building  associations  are  incorporated  by  special  acts.    Con- 
necticut, $  38. 

(pp.  13-107.) 

CHAPTER  IIL 

DEFINITION   AND  VARIETIES   OF  BUILDING   ASSOCIATIONS. 

Definition  of  building  associations,  §§  39-40. 

Terminating  societies,  2  41. 

Method  of  obtaining  loans,  \\  42-43. 

Bowkett  societies,  §  44. 

Starr-Bowkett  societies,  \  45. 

Permanent  societies,  strictly  so  called,  \  46. 

Serial  societies,  gg  47-49. 

(pp.  ^108-117.) 

CHAPTER  IV. 

FORMATION  OF  BUILDING  ASSOCIATIONS. 

Preliminary  expenses,  \  50. 

Choice  of  the  society's  name,  \  51. 

Framing  of  rules,  articles  or  constitution,  \\  52-53. 

Matters  to  be  provided  for  in  rules,  &c.,  \  54. 

Various  methods  of  incorporation,  \  55. 

Incorporation  bj  letters-patent  from  the  Executive,  \  56. 

Incorporation  by  special  act  of  Legislature,  $2  57-58. 

Latitude  in  framing  rules,  &c.,  where  incorporation  is  by  patent  or  special  act, 

§59. 

Incorporation  by  decree  of  court,  \  60. 
Incorporation  by  voluntary  association,  \\  61-62. 
Necessity  in  every  case  of  substantially  complying  with  requirements  of  statute, 

£63. 
Powers  contained  in  articles,  in  excess  of  statute,  void,  and  cause  of  forfeiture, 

264. 

Power  of  Legislature  to  modify  charter  by  subsequent  enactments,  \  65. 
Retroactive  and  expository  statutes,  §  66. 
Btatuu*  affecting  remedies  only,  \  67. 

(pp,  117-128.) 


CONTENTS.  X11J 


CHAPTER  V. 

MEMBERSHIP   IN   BUILDING  ASSOCIATIONS. 

Mode  ol  acquiring  membership,  §  68. 

Persons  capable  of  acquiring  membership,  $  69. 

Powers  of  infante  and  married  women  under  enabling  statutes,  \\  70-71. 

Status  of  husband  of  feme  sole  member  at  common  law,  §  72. 

Status  of  executor  and  administrator  of  deceased  member,  \\  73-74. 

Building  association  cannot,  of  course,  become  a  member  in  another  building 

association,  \  75. 

A  person  may  become  member  merely  to  obtaining  loan,  \  76. 
Depositors,  \  77. 

Stock  book  primary  evidence  of  membership,  $  78. 
Society  estopped  from  denying  a  person's  membership,  \\  79-80. 
Borrower  estopped  from  denying  his  membership ;  exception,  §  81. 
Termination  of  membership,  §  82. 

(pp.  128-138.) 


CHAPTER  VI. 

DUTIES  OF  MEMBERS. 

Obedience  to  rules  and  assent  to  lawful  corporate  acts,  \  83. 

Duty  of  members  as  to  stock-payments,  \  84. 

No  absolute  liability  for  stock-payments  until  the  whole  capital  subscribed 

exception,  \  85. 

Society  may  maintain  assumpsit  for  dues,  without  notice,  \  86. 
Statutory  lien  on  stock  for  arrears,  &c.,  \  87. 

Borrower's  liability  upon  his  obligation,  after  repayment  of  loan,  \$  88-90. 
Liability  for  dues,  &c.,  not  suspended  by  entry  of  suit,  \  91. 
Liability  to  fines  imposed  on  default,  \  92. 

Necessity  and  legal  aspect  of  fines  in  building  associations,  \\  93-95. 
Rules  to  be  observed  in  relation  to  fines,  \\  96-98. 
Forfeitures,  \\  99-102. 

Duty  of  members  to  render  personal  services,  \  103. 

Duty  of  members  to  contribute  pro  rota  to  losses  and  expenses  of  society,  §  104« 
Members  cannot  withdraw  to  evade  liability  to  contribute,  §  105. 
Liability  to  contribute  not  affected  by  taking  loan,  \\  106-107. 
Termination  of  liability  to  contribute,  \\  108-109. 
Personal  liability  of  stockholders  for  debts  of  society,  $  110- 
Corporate  property  may  be  followed  into  hands  of  stockholders,  {  11L 

(pp.  138-155.) 


XIV  CONTENTS. 


CHAPTER  VII. 

RIGHTS  OF  MEMBERS. 

Classification  of  rights  of  members,  J  112. 

General  rights  as  corporators,  \\  113-114. 

Nature  of  the  right  to  receive  loan,  \\  115-116. 

Right  of  members  applying  for  loan  to  be  preferred  over  outside  investments ; 

purpose  of  building  associations,  ||  117-121. 
Highest  bidder  to  receive  loan ;  minimum  premiums,  \  122. 
Right  to  claim  loan  depends  upon  ability  to  furnish  security,  §  123. 
Member  cannot  maintain  assumpsit  for  promised  loan,  §  124. 
Society  need  not  inquire  into  purpose  or  application  of  loan,  §  125. 
Proportion  of  loan  grantable  to  applicant's  stock-interest,  \  126. 
Right  of  withdrawal ;  its  foundation,  nature  and  extent,  $  127. 
Right  to  withdraw  does  not  involve  right  to  account  of  profits,  \\  128-129. 
Amount  withdrawable  by  any  member,  \  130. 
Statutory  terms  of  withdrawal,  §  131. 
Charter  and  by-law  provisions,  as  to  withdrawal,  inconsistent  with  statute,  void, 

§132. 
Terms  of  withdrawal,  deviating  from  prescribed  rule,  may  become  binding  on 

society,  \  133. 

Regulation  of  withdrawals  by  charter  or  by-laws,  construction,  $  134. 
Officers  cannot  exercise  discretion  in  approving  withdrawals  arbitrarily,  §  135. 
Withdrawing  member  becomes  a  mere  creditor  of  the  society,  \  136. 
Withdrawing  member  may  proceed  to  judgment  against  society  for  amount  due 

him,  \  137. 

Discretion  of  courts  as  to  execution  against  society,  \  138. 
Society  to  keep  funds  available  for  withdrawing  members,  \  139. 
Statutory  limitation  of  funds  available  for  withdrawing  members,  \  140. 
Effect  thereof  upon  right  to  enforce  payment  by  suit,  \\  141-143. 
Stockholder  cannot,  qua  stockholder,  sue  society  at  law  for  value  of  paid-up 

stock,  $  144. 

Member  may,  under  circumstances,  compel  settlement  in  equity,  \  145. 
Foundation  of  the  principles  applicable  to  borrowers ;  mutuality  of  the  scheme ; 

membership  of  borrowers,  \\  146-148. 

Elements  of  contract  between  borrowing  members  and  society,  \\  149-150. 
Borrowing  member  cannot  withdraw,  \  151. 
Right  of  voluntary  repayment,  \\  152-153. 
Terms  of,  and  rules  for,  voluntary  repayment  in  the  absence  of  special  by-law 

or  statutory  provision,  \\  154-157. 
Voluntary  repayment  under  the  provisions  of  the  articles,  English  decisions, 

22  158-164. 

Importance  of  English  cases  in  America;  exceptions,  \\  165-166. 
Construction  of  provisions  favoring  right  of  repayment,  \\  167-168. 


CONTENTS.  XV 

Rights  as  to  repayment  at  time  of  loan  cannot  be  varied ;  but  special  airange- 
ments,  agreed  to  by  member,  conclude  both  parties,  \\  169-170. 

Member  cannot  claim  benefit  of  special  arrangement  unless  he  consent  to  and 
carry  out  its  terms ;  except  where  value  of  stock  changed  with  a  view  to 
dissolution,  &c.,  \\  171-172. 

Borrowing  members,  being  a  majority,  cannot  force  terms  upon  investors, 
involving  discontinuance  of  society,  \  173. 

Repayment  upon  decease  of  borrowing  member,  and  judicial  sale  of  property, 
§174. 

Rights  of  member  upon  forced  repayment  on  default,  \  175. 

Borrower's  membership  not  necessarily  forfeited  by  suit  upon  default;  state- 
ment of  account  in  equity,  \\  176-177. 

Tender  ;  effect  of  refusal  to  accept  by  society,  \  178. 

Costs  in  redemption  and  foreclosure  suits,  \  179. 

Redemption  in  permanent  societies ;  liability  of  members,  \  180. 

(pp.  155-211.) 

CHAPTER  VIII. 

GOVERNMENT  OF  BUILDING  ASSOCIATIONS. 

Supreme  power  vested  in  corporate  meeting,  \  181. 
Of  the  corporate  meetings;  general  meetings,  \\  182-183. 
Special  meetings  ;  officers'  duty  in  calling ;  notice,  §  184. 
Acts  of  special,  adjourned  or  irregular  meetings,  \  185. 
Quorum ;  proxies,  \\  186-187. 

Principal  function  of  corporate  meeting  ;  election  of  officers,  \\  188-190. 
Rights  of  inspectors  and  judges  as  to  candidacy  and  holding  of  election,  §  191. 
Courts  will  not  look  into  regularity  of  election  collaterally,  \  192. 
Management  of  society  entirely  in  hands  of  its  officers,  \  193. 

(pp.  211-216.) 

CHAPTER  IX. 

FUNCTIONS,   DUTIES  AND  LIABILITIES  OF  OFFICERS. 

Usual  officers  in  building  associations,  and  their  general  powers,  §  194. 

President,  \  195. 

Treasurer,  \  196. 

Secretary,  \  197. 

Directors,  \\  198-199. 

Limits  of  the  powers  of  directors,  \  200. 

Meetings  of  directors ;  notice ;  quorum,  \\  201-20S. 

Discretion  of  directors  cannot  be  controlled  nor  delegated ;  committees,  |  204. 

Minutes  of  directors'  transactions,  \\  205-206. 

Director  may  become  party  to  contract  with  society,  \  207. 


XVI  CONTENTS. 

Modified  sense  in  which  directors  are  officers  in  the  society,  g  208. 

Personal  liability  of  directors  for  losses,  &c.,  S|  209-210. 

Directors  who  were  parties  to  fraud  upon  society,  whereby  it  was  ruined,  cannot 

share  in  its  assets;  presumptive  fraud,  \  211. 
Liability  of  directors  to  account  to  society  for  waste  or  misapplication  of  funds, 

{212. 
Right  of  individual  stockholders  to  sue  delinquent  directors  for  protection  of 

society  ;  qualifications,  \  213. 
Trustees,  \  214. 

Officers'  bonds;  when  prerequisite  to  entering  upon  office,  \  215. 
Discretion  and  responsibility  in,  and  method  of,  approving  bonds,  \  216. 
Sureties  not  discharged  by  negligence  of  society,  \  217. 
If  Officer's  election  void,  surety  not  bound,  \  218. 
Liability  of  sureties  strictly  confined  to  terms  of  bond,  \  219. 
Liability  of  officers  to  fines  and  amotion,  \  220. 
Criminal  liability  of  officers  in  certain  cases,  \\  221-222. 
Compensation  of  officers,  \\  223-225. 
Implied  liability  of  society  for  compensation,  \  226. 
A  director  cannot  claim  extra  compensation  for  acts  done  in  the  line  of  his 

duty ;  services  before  organization,  \  227. 
DC  facto  officer  cannot  claim  salary,  §  228. 
Salaried  officer,  improperly  removed,  may  sue  for  salary,  $  229. 
Officers  must  look  to  society's  funds  for  compensation,  §  230. 

(pp.  217-249.) 

CHAPTER  X. 

OENKHAL   POWERS  OP  BUILDING  ASSOCIATIONS. 

General  corporate  powers  of  building  associations,  §  231. 

Powers  defined  by  statute  and  limited  to  purposes  of  incorporation,  $  232. 

Perpetual  succession,  \  233. 

The  common  seal ;  its  custody,  use,  effect,  \\  234-235. 

Proof  of  the  common  seal ;  estoppel  upon  association,  \  236. 

Necessity  and  significance  of  seal  in  contracts  of  corporation,  \  237. 

Liability  of  association  upon  implied  contracts,  \  238. 

Contracts  entered  into,  &c.,  by  association  directly,  \\  239-240. 

Contracts  entered  into  by  association  through  agents ;  officers  are  agents,  \  241 

Appointment  of  agents,  and  persons  capable  of  becoming  such,  \  242. 

Acts  of  agents  binding  upon  society,  §  243. 

Presumptions  as  to  existence  of  agency,  \  244. 

Persons  dealing  with  agents  bound,  to  a  certain  extent,  to  take  notice  of  limits 

of  powers;  estoppel  upon  society,  \\  245-246. 
Unauthorized  contracts  of  agents ;  ratification,  \  247. 
Form  of  execution  by  agent  to  bind  society ;  personal  liability,  \\  248-249. 
Notice  to  agent  or  officer  is  notice  to  society,  \  250. 


CONTENTS.  XV11 

Delegation  of  authority  by  agents,  survival,  \  251. 

Society's  liability  for  torts  and  misrepresentations  of  agents,  \  252. 

Agents'  liability  for  interest  on  moneys  collected,  §  253. 

Eight  and  liability  to  suits  and  actions ;  employment  of  attorneys ;  forms,  Ac., 
of  proceedings,  \\  254-256. 

Society  may  sue  on  obligation  executed  to  it  by  wrong  name ;  misnomer  • 
abbreviations,  \  257. 

Necessary  averments  as  to  default  in  suits  against  borrowing  members,  \  258. 

Computation  of  period  of  default,  \  259. 

Certainty  required  in  defendant's  allegations  of  payment,  and  proof;  agency 
I  260. 

Averment  of  and  pleas  to  incorporation ;  tender,  g§  261-263. 

Suits  by  members  against  the  society ;   withdrawal-balances,  promised  loan 
refusal  to  transfer  shares,  \\  264-268. 

Society  must  be  party  to  bill  in  certain  causes,  \  269. 

Judgment  obtained  after  dissolution  in  action  pending  against  society,  \  270. 

Nature  and  qualifications  of  the  right  of  ordaining  by-laws,  g  271. 

By-laws  must  conform  with  constitution  and  laws  of  Union  and  State,  \  272. 

By-laws  must  conform  with  charter  and  purpose  of  incorporation,  else  void ; 
instances,  \\  273-277. 

By-laws  must  be  reasonable  and  equitable,  \  278. 

By-laws  cannot  have  retroactive  efficacy  as  against  rights  under  subsisting  con- 
tracts, \  279. 

By-laws  manifestly  contrary  to  interests  of  society,  &c.,  void,  \  280. 

By-laws  restricting  member  from  pursuing  legal  remedies ;  arbitration,  \  281. 

(pp.  249-285.) 

CHAPTER  XL 

LEGALITY  AND  EFFECT  OF  CERTAIN  ACTS  AND  CONTRACTS  OF  BUILDING 
ASSOCIATIONS. 

Meaning  of  the  term  "ultra  vires"  \  282. 

Criterion  of  legality  of  acts  of  building  associations,  \  283. 

Acts  merely  in  excess  of  power  may  be  made  good  as  against  society ;  liability 

of  agents  and  directors,  \  284. 
Acts  and  contracts  in  excess  of  power  merely,  and  in  defiance  of  statutory,  &c., 

prohibition ;  effect  of  either  upon  tne  rights  and  liabilities  of  either  party 

estoppel,  \\  285-292. 

Power  of  building  associations  to  borrow  money ;  English  cases,  \\  293-299. 
Mere  overdrawing  of  bank  account  is  not  borrowing,  \  300. 
Rule  in  America  as  to  borrowing  powers.  $$  301-302. 
Power  of  building  associations  to  acquire  and  hold  lands,  \\  303-304. 
English  decisions  on  power  to  acquire  land ;  liability  of  directors  acting  ultra 

vires,  \\  305-307. 

American  rule  as  to  power  to  acquire  and  hold  land,  \  308. 

B 


CONTENTS. 

Effect  upon  corporation  of  unlawful  departure  from  proper  functions,  2  309. 

Misuse  of  the  power  of  lending  money,  |  310. 

Nature  of  security  to  be  lawfully  taken ;  sureties,  \\  311-312. 

Loans  to  strangers  and  persons  not  sui  jturit ;  mortgages  of  married  women, 

\\  313-318. 

Loan*  to  other  corporations,  \\  319-321. 
Power  to  reserve  interest,  $  322. 
Power  to  compromise  with  members,  \  323. 
Declaring  dividends,  \  324. 

Liability  to  state  for  unlawful  departure  from  powers  granted,  {  325. 

(pp.  285-321.) 

CHAPTER  XII. 

LOANS  OB  ADVANCEMENTS  TO  MEMBERS. 

Analysis  of  the  transaction  and  contract  of  loan  or  advancement  between  society 

and  borrowing  member,  \\  326-327. 
Interpretation  by  the  various  courts  of  the  nature  of  loans  or  advancements  in 

building  associations,  \\  328-353. 
Decisions  in  England,  §  338. 

Maryland,  \  339. 

Kansas,  \  340. 

Massachusetts,  \  341. 

New  Jersey,  \  342. 

Virginia  (and  District  of  Columbia),  \  343. 

New  Hampshire,  |  344. 

New  York,  \  345. 

Georgia,  \  346. 

North  Carolina  (and  South  Carolina),  J  347. 

Nebraska,  \  348. 

Tennessee,  g  349. 

Kentucky,  §  350. 

Pennsylvania,  $  351. 

Indiana,  §  352. 

Connecticut;  Iowa;  Ohio,  \  353. 

Result  of  examination  of  all  decisions,  \\  354-356. 
Two  cardinal  principles  concerning  loans  and  borrowers,  {  357. 

(pp.  321-352.) 

CHAPTER  XHL 

INCIDENTS    TO  LOANS  OK  ADVANCEMENTS. 

Usury  may  become  an  element  in  a  building  association  loan,  \  358. 
Right  of  borrower  to  recovery  of  usury ;  qualifications,  \\  359-360. 


CONTENTS.  XIX. 

Rule  as  lo  recovery  of  usury  paid  in  North  Carolina  and  Georgia  where  bor 

rowers  are  members,  \  361. 
Limitation  in  suite  for  recovery  of  usury,  $  362. 
Who  may  set  up  the  defence  of  usury,  \\  363-365. 
Usury  merged  in  judgment  cannot  be  recovered,  \  366. 
Plea  of  usury  must  conform  to  statute,  \  367. 

?harges  incidental  to  negotiation  of  loan,  when  not  usurious,  $  368. 
Lawful  incidents  to  building  association  mortgage,  \\  369-370. 
Significance  of  stipulation  for  stock-payments  or  dues,  \\  371-372. 
"Dues"  practically  including  interest,  or  redemption  money,  |  373. 
Right  and  extent  of  interest  reservation,  \  374. 

Interest,  in  any  form,  ceases  upon  re-imbursement  of  society,  $\  375-376. 
Running  of  interest  not  suspended  by  bringing  and  during  pendency  of  suit ; 

but  by  tender,  g  377. 
Premiums,  \  378. 
Fines,  \  379. 

Security,  its  nature  and  kind,  \\  380-381. 
Joint  security  of  members  and  outsiders,  \  382. 
Reservations  legalized  in  the  several  states,  \  383. 
"Loan"  construed  to  mean  "amount  actually  advanced,"  $§  384-385. 
Binding  force  of  contract  of  loan,  &c.,  made  in  pursuance  of  charter  and 

statutory  powers,  \  386. 

Practical  results  of  building  association  loans,  \  387. 

(pp.  353-386.) 

CHAPTER  XIV. 

PREMIUM. 

Definition  of  premium  generally,  \  388. 

Its  true  nature  and  method  of  payment,  \\  389-390. 

For  purposes  of  computation  must  be  treated  as  a  deduction,  \  391. 

Premium  must  ordinarily  be  a  gross  amount  per  share,  not  merely  increased 

interest,  \\  392-393. 

Premium  must  be  fixed  by  free  competition ;  minimum  premium,  \\  394-397. 
Interest  upon  premium,  \  398. 

Abatements,  discounts  and  remissions  on  premiums,  \\  399-400. 

(pp.  387-398.) 

CHAPTER  XV. 

FINES. 

Purpose  of  fines  in  building  associations,  \  401. 
Legal  aspect  of  fines  in  building  associations,  \  402-403. 
Submission  to  fines  an  essential  part  of  building  association  loans ;  married 
women,  &o,  \  404. 


XX  CONTENTS. 

Power  to  impose  fines  depends  upon  authority  conferred  by  statute  and  charter, 
{405. 

Regulation  of  fines  belongs  to  by-law ;  rules  to  be  observed,  $  406. 

Fines  must  be  notorious,  certain,  and  fixed  by  by-law ;  construction  of  ambigu- 
ous provisions  favors  member,  \\  407-409. 

Fines  must  be  reasonable ;  fines  upon  fines,  or  in  progression,  \\  410-412. 

Proper  measure  of  fines,  $  413. 

Fines  must  be  imposed  for  dereliction  in  duties  incident  to  membership; 
depositors,  \  414. 

Fines  upon  interest,  \\  415-416. 

Interest  upon  fines,  §  417. 

Discretion  of  directors  in  remitting  fines,  $  418. 

(pp.  399-413.) 


CHAPTER  XVI. 

MORTGAGES. 

Right  to  take  mortgage  security  involved  in  power  to  make  loans  or  advance- 
ments ;  mortgageable  estates,  \  419. 

Validity  of  mortgage  as  a  security  under  statute  and  by-laws,  \  420. 

Examination  of  the  various  forms  of  mortgages  used  in  building  associations ; 
their  relative  propriety  and  adequacy,  \\  421-422. 

Covenants  as  to  stock  payments,  Ac.,  \  423. 

Effect  and  validity  of  building  association  mortgage  ;  equity  jurisdiction,  \  424 

Covenants  as  to  default,  \  425. 

Propriety  of  court's  looking  at  rules  to  ascertain  amount  due,  \  426. 

Rule  for  ascertaining  amount  presently  due  upon  mortgage,  \  427. 

Same  rule  applicable  in  courts  of  law  and  equity ;  basis  of  equity  jurisdiction 
in  foreclosure ;  preliminary  account ;  decree,  §  428. 

Discharge  of  mortgage  by  sale  of  property  does  not  necessarily  discharge  debt : 
remedy  in  such  cases,  \  429. 

Terms  of  mortgage  preclude  withdrawal ;  right  of  repayment,  \  430. 

Sale  upon  mortgage,  and  application  of  proceeds  of  sale  and  value  of  stock  to 
debt,  extinguish  membership  of  debtor,  \  431. 

Mortgage  (or  decree  after  preliminary  account),  after  payment  of  amount  due, 
stands  as  security  for  future  membership  duties ;  rights  of  mortgagee  in 
possession,  §  432. 

Fjrors  and  omissions  in  mortgages,  \\  433-434. 

Purchaser  subject  to  building  association  mortgage,  \  435. 

Building  association,  mortgagee,  may  exercise  all  the  powers  given  it  concur- 
rently, notwithstanding  its  rules,  \  436. 

Tender  upon  building  association  mortgage,  \  437. 

Taxation  of  mortgages  held  by  building  associations ;  power  of  Legislature  to 
remit,  $  438. 


CONTENTS.  •  Xil 

Exemption  of  building  association  mortgages  in  England  held  to  include  mort- 
gages by  strangers,  \  439. 

Members'  mortgages  held  by  building  associations  are  not  assets  for  the  purpose 
of  winding  up.  but  for  taxation  of  its  personal  property,  \  440. 
(pp.  414-437.) 

CHAPTEK  XVII. 

THE  STOCK   OP  BUILDING   ASSOCIATIONS. 

. 

Definition  of  stock ;   implied  condition  in  subscription ;   deficiency  in  stock- 
subscription,  $  441. 

Implied  condition  in  subscription  may  be  waived ;  estoppel,  \  442. 

Increase  of  stock,  \  443. 

Property  in  shares  of  stock,  \  444. 

Transfer  and  assignment  of  shares  of  stock,  \\  445-446. 

Restraints  upon  transfer ;  regulation  by  by-law,  g  447. 

Remedy  for  improper  refusal  to  transfer;  measure  of  damages,  \\  448-449. 

Lien  of  society  upon  shares  for  arrears,  &c. ;  levy  on  stock  covered  by  lien, 
§450. 

Right  of  society  to  enforce  stock-payments  by  suit,  \  451. 

Relation  of  borrower's  stock-payments  to  his  debt  to  the  society,  $  452. 

Borrower's  right  to  apply  stock-payments  to  extinguishment  of  his  debt,  $  453. 

Society's  right,  being  pledgee,  to  apply  stock-payments  of  borrower  to  extin- 
guishment of  his  debt ;  character  of  such  application,  \  454. 

Value  of  stock  for  purposes  of  application  to  debt,  \\  455-457. 

Borrower's  right  of  application  lost  by  assignment  of  shares  to  third  party,  \  458. 

Right  of  borrower's  representative  or  surety  to  apply  stock  to  debt ;  judgment 
creditors,  \  459. 

Marshalling  of  assets,  as  to  stock  assigned  as  collateral  and  property  mortgaged, 
\\  460-466. 

Standing  of  judgment  creditors,  as  to  marshalling  of  assets,  \  467. 

Effect  of  rights  of  third  parties  upon  claim  for  marshalling  of  assets,  \  468. 

Notice  of  subsisting  rights  to  compel  resort  to  one  of  two  funds,  \  469. 

Taxation  upon  capital  stock,  \  470. 

(pp.  438-476.) 

CHAPTER  XVIII. 

DISSOLUTION   AND   EFFECTS  OF   DISSOLUTION. 

Methods  of  termination  of  building  associations,  \  471. 

Events  whose  happening  ipso  facto  ends  corporate  existence,  \\  472—473. 

Dissolution  by  voluntary  agreement  of  stockholders  and  surrender  of  franchise, 

\\  474-475. 

Surrender  may  be  inferred  under  certain  circumstances,  \  476. 
Dissolution  by  act  of  legislature,  \  477. 


Mil  CONTENTS. 

Dissolution  by  decree  of  court,  2  478. 

Grounds  of  forfeiture  of  franchises ;  who  entitled  to  ask  it,  55  479-481. 

Right*  of  and  grounds  for  appointment  of  receiver  by  court,  55  482-484. 

Insolvency ;  distribution  of  assets,  55  485-487. 

Persons  entitled  to  ask  for  appointment  of  receiver,  55  488-489. 

Right  of  members  to  ask  interposition  of  court  to  wind  up  society  when  shares 

at  par,  \\  490-491. 
Financial  condition  which  must  be  shown  to  exist;  mortgages  of  members  not 

assets  for  winding  up,  5  492. 
Effect  of  expiration  of  charter  limitations  upon  society's  corporate  existence, 

55  493-494. 

Subsisting  liabilities  of  society,  \  495. 
Effect  of  dissolution  upon  obligations  of  borrowing  members;    exceptions, 

55  496-603 

(pp.  476-509.) 

CHAPTER  XIX. 

THE  PLEA  OF  NUL  TIEL  CORPORATION. 

Corporate  existence  de  facto  with  prima  facie  title  shown  cannot  be  questioned 
collaterally ;  state  alone  can  question  incorporation,  \  504. 

Same  rule  obtains  under  all  methods  of  incorporation,  §  505. 

Irregularities  in  obtaining  charter  which  cannot  be  taken  advantage  of  collater- 
ally, 5  506. 

Unlawful  provisions  in  by-laws,  5  507. 

Illegal  acts  subsequent  to  incorporation,  \  508. 

Lapse  by  charter  limitation ;  denial  of  specific  powers ;  curative  acts,  55  509-511 . 

Exceptions  to  rule  that  corporate  existence  cannot  be  collaterally  inquired  into, 
5512. 

Admission  of  corporate  existence  estops  from  denying  it  subsequently ;  pur- 
chaser from  mortgagor  to  society,  \\  513-515. 

Estoppel  arising  by  behavior,  5  516. 

(pp.  510-520.) 

CHAPTER  XX. 

UNINCORPORATED  BUILDING  ASSOCIATIONS. 

General  nature  and  legal  status  of  unincorporated  building  associations,  5  517. 
Unincorporated  associations  cannot  claim  benefit  of  statutes  designed  to  protect 

societies  incorporated  under  them  ;  by-laws,  \  518. 

Management  and  contracts  of  unincorporated  building  associations ;  agents,  $  519. 
Effect  of  incorporation  upon  rights  acquired  whilst  unincorporated,  5  520. 
Incorporation  of  association  by  its  existing  constitution  and  by-laws,  5  521. 

(pp.  520-526.) 
INDFZ p.  527. 


TABLE  OF  ABBREVIATIONS 

OF  REPORTS  CITED. 


Abb.  App.  Dec.— Abbott's  Appeal  Decisions,  New  York,  1850-69. 

Anstr. — Anstruther's  Exchequer  Reports,  1792-97.     Engl. 

Atk. — Atkyn's  Reports,  Chancery,  1736-55.     Engl. 

B.  &  Ad.— Barnewall  &  Adolphus'  King's  Bench  Reports,  1830-33.     Eng 

B.  &  A.  (or  Aid.)— Barnewall  &  Alderson's  King's  Bench  Reports,  1818  23 

Engl. 

B.  &  C.— Barnewall  &  Creswell's  King's  Bench  Reports,  1823-30.    Engl. 
B.  &  S.— Best  &  Smith's  Queen's  Bench  Reports,  from  1861.    EngL 
Barb.— Barbour,  New  York  Supreme  Court,  1847-77. 
Beas. — Beasley's  Reports,  New  Jersey  Chancery,  1858-60. 
Beav. — Beavan's  Reports  of  Cases  in  th«  Rolls  Court,  1838-66.    EngL 
Bell,  C.  C.— Bell's  Reports  of  Crown  Cases  Reserved,  1858-60.    EngL 
Bingh. — Bingham's  Reports,  Common  Pleas,  1822-34.     Engl. 
Binn. — Binney's  Reports,  Pennsylvania  Supreme  Court,  1799-1814. 
Blackf. — Blackford,  Indiana  Supreme  Court,  1817-47. 
Bligh,  N.  S.— Bligh's  House  of  Lords  Reports,  New  Series,  1827-37.    EngL 

B.  Mon.  (or  Monr.) — Ben.  Monroe's  Reports,  Kentucky,  1840-58. 

Bos.  &  Pul.— Bosanquet  &  Puller's  Common  Pleas  Reports,  1797-1807.    Engl. 
Bosw. — Bosworth,  New  York  City  Superior  Court,  1857-63. 
Burr. — Burrow's  Reports,  King's  Bench,  1759-70.     Engl. 

C.  B.,  or  Com.  B. — Common  Bench  Reports,  1845-56.    Engl. 

C.  B.,  N.  S.,  or  Com.  B.,  N.  S.— Common  Bench  Reports,  New  Series,  1856-65. 

Engl. 

Car.  &  M. — Carrington  &  Marshman's  Cases  at  Nisi  Prius,  1840-42.     EngL 
Car.  &  P.— Carrington  &  Paine's  Cases  at  Nisi  Prius,  1823-41.     Engl. 
C.  C.  R.— Crown  Cases  Reserved,  Engl.  Law  Reports,  1865-1875.    EngL 
C.  E.  Gr. — C.  E.  Green's  Reports,  New  Jersey  Chancery,  New  Jersey  Equity 

16-27,  1863-76. 

C.  L.  R. — Common  Law  Reports,  1854-55.     Engl. 
Cold,  or  Coldw. — Coldwell's  Reports,  Tennessee,  1860-70. 
Com.  Dig. — Comyn's  Digest  of  the  Laws  of  England. 
Cow. — Cowen,  New  York  Supreme  Court  and  Court  of  Errors,  1823-1829. 
Cowp.— Cowper's  Reports,  King's  Bench,  1774-1778.    EngL 
Cox,  C.  C.— Cox's  Criminal  Law  Cases,  from  1843.    EngL 

(xxiU) 


XXIV  TABLE  OF   ABBREVIATIONS. 

Craig  A  Ph.  or  Cr.  A  Ph.— Craig  &  Philips'  Chancery,  1841. 
Cranch— Cranch's  Reports,  U.  S.  Supreme  Court,  1800-1815. 
Cro.  Eliz. — Croke's  King's  Bencli  and  Common  Pleas  Reports  during  th«  reign 

of  Elizabeth. 

Cruise— Cruise's  Digest.     Engl. 
<  usL- -dialling's  Reports,  Massachusetts,  1848-53. 
D  x.  S.— Dowling's  New  Series,  Bail  Court  Reports,  1841-1842.    Engl. 

D.  &  L.— Dowling  &  Lowndes'  Reports  in  the  Bail  Courts,  1846-49.     E~gl. 
Day— Day,  Connecticut  Supreme  Court  of  Errors,  1802-1813. 

Dears.  &  B.,  C.  C.  R.— Dearsly  &  Bell's  Crown  Cases  Reserved,  1856-58.    EngL 

De  Gex— De  Gex's  Reports  in  Bankruptcy,  1836-39.    Engl. 

De  G.  &  J.— De  Gex  &  Jones'  Reports  in  Chancery,  1857-60.     Engl. 

De  G..  F.  &  J.— De  Gex,  Fisher  &  Jones'  Reports  in  Chancery,  1860-61 .    EngL 

De  G.,  J.  &  S.— De  Gex,  Jones  &  Smith's  Reports  in  Chancery,  1862-65.     Engl. 

De  G.,  M.  &  G. — De  Gex,  Macnaghten  &  Gordon's  Reports  in  Chancery   1851- 

57.     Engl. 
De  G.  &  Sm.— De  Gex  &  Smale's  Reports  in  the  Courts  of  Knight  Bruce,  V.  C. 

&  Parker,  V.  C.,  1846-52.    Engl. 
Des.  (Desau.) — Desaussure,  South  Carolina  Court  of  Chancery  and  Court  of 

Appeals,  1784-1813. 

Doug.,  or  Dougl. — Douglass,  Michigan  Supreme  Court,  1843-47. 
Dow  &  Cl.— Dow  &  Clark's  House  of  Lords  Cases,  1827-1832.    Engl. 
Dr.  &  S.— Drewry  &  Smale's  Chancery  Reports,  1860-65.     Engl. 
Dutch.— Dutcher,  New  Jersey  Supreme  Court,  1855-62. 

E.  &  B.— Ellis  &  Blackburn's  Queen's  Bench  Reports,  1852-59.    Engl. 
East— East's  Reports,  King's  Bench,  1801-12.     Engl. 

Edw. — Edwards'   New  York  Vice-Chancellor's  Court,  and  Supreme  Court, 

1831-50. 

Esp.— Espinasse's  Reports  or  Digest,  N.  P.,  1793-1807.    Engl. 
Exch. — Exchequer  Reports,  1847-57.     Engl. 

F.  &  F.— Foster  &  Finlason's  Cases  at  Nisi  Prius,  1853-67.    Engl. 
Freem.  Ch. — Freeman,  Mississippi  Superior  Court  of  Chancery,  1839-43. 

G.  &  D.— Gale  &  Davidson's  Queen's  Bench  Reports,  1841-43.    Engl. 

G.  &  J.,  or  Gill  &  J.— GUI  &  Johnson,  Maryland  Court  of  Appeals,  1829-43. 

Green,  N.  J. — Green,  New  Jersey  Supreme  Court,  1831-36. 

Green,  N.  J.  Ch. — Green,  New  Jersey  Chancery  and  Court  of  Error  and 

Appeals,  1833-45. 

Greenl.— Greenleaf's  Reports,  Maine,  1820-32. 

H.  &  N. — Hurlstone  &  Norman's  Exchequer  Reports,  1856-61.     Engl. 
II.  L.  C.— House  of  Lords'  Cases,  1847-66.    EngL 
Hall  &  T.— Hall  &  Twell,  Chancery  Reports,  1848-50.     Engl. 
Halst.,  or  Hals.— Halsted,  New  Jersey  Supreme  Court,  1821-3. 
Halst.,  or  Hals.  Ch.— Halsted,  New  Jersey  Court  of  Chancery,  1845-52. 
Hare— Hare's  Chancery  Reports,  1841-53. 
Hair.,  or  H.  (Pa,)— Harris,  Pennsylvania  State  Reports,  13-24. 


TABLE  OF   ABBHEVIATIONS.  XXV 

Hill— Hill,  New  York  Supreme  Court  and  Court  of  Appeals,  1841-44. 

Hob.— Hobart's  Reports,  King's  Bench,  1603-1625.     Engl. 

How. — Howard's  Reports,  U.  S.  Supreme  Court,  1843-60. 

How.  Pr  —  Howard's  Practice  Reports,  New  York,  1844-79. 

Ind. — Reports  of  Indiana  Supreme  Court. 

Ired.  Law  Rep. — IredelPs  Law  Reports,  North  Carolina,  1840-52. 

Jr.  Com.  Law  Rep. — Irish  Common  Law  Reports,  1850-66. 

Ir.  Eq.  Rep. — Irish  Equity  Reports,  1850-66. 

J.  P. — Justice  of  the  Peace,  Reports  in  all  the  Courts,  from  1838.    Engl. 

Johns. — Johnson,  New  York  Supreme  Court  and  Court  of  Errors,  1806-23. 

Jur. — Jurist,  Reports  in  all  the  Courts,  1837-54.     Engl. 

Jur.  N.  S.— Jurist,  New  Series,  Reports  in  all  the  Courts,  1855-66.     Engl. 

K.  &  J. — Kay  &  Johnson's  Chancery  Reports,  1854-58.     Engl. 

Kay — Kay's  Chancery  Reports,  1853-54.     Engl. 

L.  &  C.  C.  C.— Leigh  &  Care's  Crown  Cases,  1861-65.    Engl. 

L.  J. — Law  Journal  Newspaper,  from  1866.     Engl. 

L.  J.,  Bank. — Law  Journal  Reports  in  Bankruptcy. 

L.  J.,  Ch. — Law  Journal  Reports  in  Chancery. 

L.  J.,  C.  P. — Law  Journal  Reports  in  the  Common  Pleas. 

L.  J.,  M.  C. — Law  Journal  Reports  of  Magistrates'  Cases. 

L.  J.,  P.  C. — Law  Journal  Reports  of  Privy  Council  Cases. 

L.  J.,  Q.  B. — Law  Journal  Reports  in  the  Queen's  Bench. 

L.,  M.  &  P.— Lowndes,  Maxwell  &  Pollock's  Bail  Court  Reports,  1850-6L 

Engl. 

L.  R.,  C.  C.  R. — Law  Reports,  Crown  Cases  Reserved. 
L.  R.,  Ch.  App. — Law  Reports,  Chancery  Appeal  Series. 
L.  R.,  C.  P. — Law  Reports,  Common  Pleas  Series. 
L.  R.,  Eq. — Law  Reports,  Equity  Series. 
L.  T. — Law  Times  Newspaper,  from  1845. 
L.  T.  Rep.— Law  Times  Reports,  1845-59. 

L.  T.  Rep.,  N.  S. — Law  Times  Reports,  New  Series,  1859  to  present  time. 
Lane.  B. — Lancaster  Bar,  Pa. 

Ld.  Ray. — Lord  Raymond's  Reports,  King's  Bench,  1660-84.     Engl. 
Leg.  Chron. — Legal  Chronicle,  Pa. 
Leg.  &  Ins.  Rep. — Legal  and  Insurance  Reporter. 
Luz.  Leg.  Reg. — Luzerne  Legal  Register,  Pa. 

M.  &  G. — Manning  &  Granger's  Common  Pleas  Reports,  1840-45.     Engl. 
M.  &  S.— Maule  &  Selwyn's  King's  Bench  Reports,  1813-17.    Engl. 
M.  &  W.  -Meeson  &  Welsby's  Exchequer  Reports,  1836-47.    Engl. 
M.  C.  C.  R.— Moody's  Crown  Cases  Reserved,  1824-44.    Engl. 
Mag.  Cas. — Cox's  Reports  of  Cases  Connected  with  the  Duties  of  Magistrate* 

Engl. 

Macph. — Macpheraon's  Scotch  Reports. 

McArth. — McArthur,  District  of  Columbia  Supreme  Court,  1873-76. 
McCart.—  McCarter,  New  Jersey  Equity,  1861-62. 


XXVI  TABLE  OF    ABBREVIATIONS. 

Mete.— Metcalf 's  Reports,  Massachusetts,  1840-47. 

Monr.,  Mon.,  or  T.  B.  Monr.  (Ky.)— T.  B.  Monroe's  Reports,  Kentucky,  1824-28* 

Moo. — Moore's  Common  Pleas  Reports,  1817-27.    Engl. 

Moo.  &  M.— Moody  &  Malkin's  Cases  at  Nisi  Prius,  1827-30.     EngL 

Mun. —  Mumford,  Virginia  Court  of  Appeals,  1810-20. 

N.  J.  Eq. — New  Jersey  Equity  Reports. 

N.  &  M.— Neville  &  Manning's  King's  Bench  Reports,  1831-36.     EngL 

N.  R.— New  Reports,  comprising  all  the  Courts,  1862-64.    Engl. 

N.  V.  W.  D.— New  York  Weekly  Digest. 

New  Seas.  Cas. — Carrow,  Hamerton  &  Allen's  New  Sessions  Cases,  1844-51. 

Engl. 

P.  F.  Sm.— P.  F.  Smith's  Reports,  Pennsylvania  State  Reports,  51-81.* 
P.  Wras.— Peere  Williams'  Chancery  Reports,  1695-1734,    Engl. 
Pars. — Parsons'  Equity  Cases,  Court  of  Common  Pleas,  1st  Jud.  Distr.,  Pa.,  in 

Equity,  1841-51. 

Par.,  or  Park.— Parker's  Reports,  Exchequer,  1743-67.    EngL 
Pa.  St. — Pennsylvania  State  Reports,  from  1844. 
Pet.— Peter's  Reports,  U.  S.  Supreme  Court,  1827-42. 
Pick.— Pickering's  Reports,  Mass.,  1822-40. 
Pittsb.  Leg.  Journ. — Pittsburgh  Legal  Journal,  Pa. 
Price — Price's  Exchequer  Reports,  1814-34.    EngL 
Q.  B.— Queen's  Bench  Reports,  1841-52.    Engl. 
Rand. — Randolph,  Virginia  Court  of  Appeals,  1821-28. 
Rep'r  Cine.  Sup.  Ct. — Cincinnati  Superior  Court  Reporter  (Ohio),  1870-72. 
Rol.  Abr. — Rollin's  Abridgment.     EngL 
Russ.— Russell's  Chancery  Reports,  1823-29.    Engl. 
Russ.  &  Ry.— Russell  &  Ryan's  Crown  Cases,  1799-1823.    EngL 
S.  &  R.,  or  Serg.  &  R.— Sergeant  &  Rawle's  Reports,  Pa.,  1814-28. 
Salk.— Salkeld's  Reports,  1689-1712.     EngL 

Sand.,  or  Sandf.— Sandford,  New  York  City  Superior  Court,  1847-52. 
Sand,  (or  Sandf.)  Ch.— Sandford,  New  York  Court  of  Chancery,  1843-47. 
Saxton's  Ch. — New  Jersey  Court  of  Chancery,  1830-32. 
Sc.— Scott's  Common  Pleas  Reports,  1834-40.    EngL 
Sc.  Jur. — Scotch  Jurist,  Court  of  Sessions,  1829-73. 
Sel.  C.  C. — Select  Cases  in  Chancery.     P>ngl. 

Sim.— Simon's  Reports,  Chancery,  1826-49 ;  New  Series,  1850-52.     Engl. 
Shaw  &  Dunlop's  Reports.    Scotch. 
Skin.— Skinner's  Reports,  King's  Bench,  1681-98.    Engl. 
Stark.,  N.  P.— Starkie's  Reports,  Nisi  Prius,  1815-22. 
Stew. — Stewart's  Reports,  New  Jersey  Chancery,  New  Jersey  Equity,  from 

vol.  28  (1877). 

Stock. — Stockton's  Reports,  New  Jersey  Chancery,  1852-58. 
T.  R— Term  Reports  in  the  King's  Bench,  1785-1800.    EngL 
Taunt. — Taunton's  Reports,  Common  Pleas,  1808-19.     EngL 
U.  S.  R. — United  States  Reports,  Supreme  Court. 


TABLE   OF   ABBREVIATIONS.  XXV11 

Vern.— Vernon's  Chancery  Cases,  1680-1718.    Engl. 

Ves.— Vesey's  (jun.)  Reports  in  Chancery,  1789-1817.    Engl. 

W.  N.  C.— Weekly  Notes  of  Cases,  Pa. 

W.  R.— Weekly  Reporter,  all  the  Courts  from  1852.    Engl. 

Wall.— Wallace,  United  States  Supreme  Court,  1863-75. 

Wend.— Wendell,  New  York  Supreme  Court  and  Court  of  Errors,  1828-41. 

Wheat.— Wheaton's  Reports,  United  States  Supreme  Court,  1816-27. 

Wh.,  or  Whart. — Wharton's  Reports,  Pennsylvania  Supreme  Court,  1835~11» 

N.  B.— S.  O.  means  "  Same  Case ; "  8.  P.  "  Same  Principle." 


TABLE  OF  CASES  CITED 


The  References  are  to  Pages. 


Adams  v  Hefferman,  9  Watts  (Pa.)  529 475 

.Etna  Im.  Co.  v.  Weiss,  28  Vt.  93 273 

African  Soc'y  v.  Varick,  13  Johns.  (N.  Y.)  38 269 

Agricultural  Bank  v.  Burr,  24  Me.  256 443 

Agricultural  Bank  v.  Wilson,  24  Me.  273 443 

Alexander  v.  Worman,  30  L.  J.  Ex.  198 ;  3  L.  T.  Rep.,  N.  S.,  477 ;  25  J.  P. 

312;  6H.  &N.  100 247 

Allan  v.  Miller,  22  L.  T.  Rep.,  N.  S.,  825;  6  Mag.  Cas.  472 264 

Allard  v.  Bourne,  15  C.  B.,  N.  S.,  (109  Engl.  C.  L.  Rep.)  468 ;  3  N.  R.  46...  219 

Allen  t>.  Curtis,  26  Conn.  456 229 

Allen  v.  Dykers,  3  Hill  (N.  Y.)  593 447 

Amherst  Bank  v.  Root  et  al.,  2  Mete.  (Mass.)  534 234,  236 

Anderson  v.  Sanderson,  2  Stark.  N.  P.  204 258 

Appeal  of  Sec'd  Nat'l  Bank  of  Titusville,  85  Pa.  St.  528 358 

Archer  v.  Harrison,  7  D«  G.,  Mac.  &  G.  404  ;  21  J.  P.  515;  29  L.  T.  Rep. 

71;  3  Jur.,  N.  S.,  194 172,  197,  284 

Armitage  v.  Walker,  2  Jur.,  N.  S.,  13 ;  20  J.  P.  53 ;  26  L.  T.  Rep.  182 ;  2 

Kay  &  J.  211 174,  199,  274 

Arnold  v.  The  Mayor,  &c.,  of  Poole,  5  Scott,  N.  R.  741 ;  2  D.,  N.  S.,  574 ; 

4  M.  &  G.  860;  12  L.  J.,  C.  P.  97 ;  7  Jur.  653 232,  269 

Arthur  v.  Homer,  6  Otto  (96  U.  S.)  137 83,  96 

Ashland  Banking  Co.  v.  Centralia  Mut.  Sav.  Fund  Ass'n,  9  Luz.  Leg.  Reg. 

(Pa.)  41 251,  275,  309 

Association  v.  Gibson,  6  W.  N.  C.  (Pa.)  502 85 

Association  v.  Kribs,  7  Leg.  &  Ins.  Rep.  21 87,  141,  450 

Association  v.  Neurath,  2  W.  N.  C.  (Pa.)  95 86,  178,  378,  397 

Association  p.  Steele,  11  W.  N.  C.  (Pa.)  204 85,  311,  315 

Association  ».  Wall,  7  Phila.  240 86,  130,  271,  451,  469 

Att'y  Gen'l  v.  Davy,  2  Atk.  212 214 

Att'y  Gen'l  v.  Utica  Ins.  Co.,  2  Johns.  Ch.  371 229 

Att'y  Gen'l  v.  Wilson,  1  Craig  &  Ph.  (18  Engl.  Ch.  Rep.)  1 ;  10  L.  J,  N.  &, 

53 227,  229 

Alwood  v.  Merryweather,  L.  R.  5  Eq.  464  n. 158 

(nix) 


TABLE  OP  CASES  CITED. 

Auditor  Curie's  case,  11  Co.  36 265 

Await  v.  Eutaw  Build'g  Ass'n,  No.  4,  34  Md.  435 35,  355 

Ayres  v.  Hustard,  15  Conn.  504. 473 

Ayres  v.  South  Australian  Building  Co.,  L.  R.3  P.  C.  548 310 


Babcock  et  al.  r.  The  Middlesex  Sav.  Bank  and  Build'g  Ass'n,  28  Conn. 

302 106,  170,  278,  446 

Badger  v.  Bank  if  Cumberland,  26  Me.  428  259 

Badlam  v.  Tucker,  1  Pick.  (Mass.)  389 .! 448 

Baker  v.  Adm'r  of  Backus,  32  111.82 329,513 

Baldwin  v.  Bank  of  Newburgh,  1  Wall.  234 259 

Baltimore  Perm't  Build'g  and  Land  Soc'y  v.  Taylor,  41  Md.  409 35,  39,  335, 

378,  382,  397,  416 

Bank  r.  Wister,  2  Pet.  (U.S.)  318 256 

Bank  of  Alabama  v.  Comegys,  12  Ala.  772 222 

Bank  of  Augusta  v.  Earle,  13  Pet.  587 260 

Bank  of  Columbia  v.  Patterson's  Aclm'rs,  7  Cranch  299 25G 

Bank  of  Commerce's  App.,  73  Pa.  St.  Rep.  59 84,  135,  225,  443,  444 

Bank  of  Gallopolis  v.  Trimble,  6  B.  Monr.  (Ky.)  599 520 

Bank  of  Manchester  v.  Allen,  11  Vt.  302 273 

Bank  of  Michigan  r.  Williams,  5  Wend.  478 272 

Bank  of  Middlebury  v.  Rutland,  <&c.,  R.  Co.,  30  Vt.  159 225 

Bank  of  New  York  v.  Bank  of  Ohio,  29  N.  Y.  619 264 

Bank  of  Pennsylvania  v.  Winger,  1  Rawle  (Pa.)  295 474 

Bank  of  United  States  v.  Dandridge,  12  Wheat.  68 253 

Bank  of  United  States  v.  Dunn,  6  Pet.  51 259 

Bank  of  Utica  v.  Smalley,  2  Cow.  (N.  Y.)  770 272,  273 

Bank  of  Waterville  v.  Beetser,  13  How.  Pr.  270 278 

Barclay  v.  Tallman,  4  Edwards  Ch.  (N.  Y.)  123 488 

Barker  r.  Bigelow,  15  Gray  (Mass.)  130 39,  172,  201,  325, 

337,  379,  451,  455,  456,  524 
Barnard  v.  Pilsworth,  6  C.  B.  692  n, ;  S.  C.,  18  L.  J.,  C.  P.  330  n. ;  14  L.  T. 

Rep.  132 4.15 

Barndt  v.  Greul,  4  Leg.  Gaz.  (Pa.)  388;  1  Luz.  Leg.  Reg.  737 86,  371 

Bartlett  v.  King,  12  Mass.  545 s; 

Baxters  Mclntire,  13  Gray  (Mass.)  168 39,  261,  337,  524,  526 

Bayard  v.  Farmers'  and  Mechanics'  Bank,  52  Pa.  St.  232 444 

Baylors  v.  Orne,  Freem.  Ch.  161 229 

Bechtold  v.  Brehm,  2  Casey  (Pa.)  269;  26  Pa.  St.  269 84,344,  346 

Becket  r.  Uniontown  Build'g  and  Loan  Ass'n,  88  Pa.  St.  211 84, 165,  252, 

349,  484,  485,  513,  515,  518 

Beete  v.  Bidgood,  7  B.  &  C.  453 354 

Beneficial  Ass'n  of  Brotherly  Unity,  38  Pa.  St.  299 147 


TABLE  OF   CASE&   CITED.  XXXI 

Bennington  Iron  Co.  v.  Rutherford,  3  Harr.  (N.  J.)  105 272 

Bentley  v.  Phelps,  27  Barb.  (N.  Y.)  524 247 

Berlin  Build'g  and  Loan  Ass'n  v.  Clifford,  3  Stew.  (N.  J.)  482 64 

Berry  v.  Thompson,  17  Johns.  (N.  Y.)  Ch.  436 361 

Bibb  County  Loan  Ass'n  v.  Richards,  21  Ga,  592 5, 107,  122, 

340,  341, 379. 526 

Bill  r.  Dareuth  Valley  R.  Co.,  1  H.  &  N.  305 ;  37  Engl.  Law  and  Eq.  539.. .  244 
Birmingham  et  al.  v.  The  Md.  Land  and  Perm't  Homestead  Ass'n  of 

Balto.  County,  45.Md.  541. 35,  39,  335,  378,  391,  397,  416 

Bismark  Bujld'g  and  Loan  Ass'n  v.  Bolster  et  al.,  11  Norris  (92  Pa.  St.) 

123 85,  415 

Bissell  v.  M.  S.  &  N.  J.  R.  R.  Co.,  22  N.  Y.  258 288 

Black  v.  Galway,  12  Har.  (Pa.)  18 315 

Blackburne's  Appeal,  39  Pa.  St.  160 84,  126 

Blondheim  v.  Moore,  11  Md.  365 487 

Blue  v.  West  Kilbride  Free  Gardeners'  Soc'y,  4  Macph.  1042;  38  Sc. 

Jur.  538 230 

Board  of  Education  v.  Greenebaum,  39  111.  609 255 

Boston  Type  Foundry  v.  Spooner,  5  W.  93 l>7:i 

Bottomly  v.  Fisher,  31  L.  J.  Exch.  417 ;  S.  C.,  6  L.  T.  Rep.,  N.  S.,  688....  264 

Bourgignon  Build'g  Ass'n  v.  Comm'th,  10  W.  N.  C.  (Pa.)  161 85,  125,  476 

Bowkerv.  Mill  River  Loan  Fund  Ass'n,  7  Allen  (Mass.)  100.. ..40,  152,  182, 

337,  379,  495,  496,  500,  502,  504 

Bradstreet  v.  Bank  of  Royalton,  42  Vt.  128 225 

Breden  v.  Dunbarry,  14  Serg.  &  Rawle  (Pa.)  27 263 

Briggs  v.  Penniman,  8  Cow.  (N.  Y.)  387 154,  517 

Briggs  v.  Thompson,  20  Johns.  (N.  Y.)  294 355 

Brigham  v.  Dana,  29  Vt.  1 351 

Bright  v.  Hutton,  3  H.  L.  Cas.  341 ;  S.  C.,  16  Jur.  695 ;  17  L.  T.  Rep.  249..  117 

Brinkerhoff  v.  Brown,  7  Johns.  Ch.  (N.  Y.)  217 487 

Brindle  v.  Mcllvaine,  9  S.  &  R.  (Pa.)  74 444 

Brinley  r.  Mann,  2  Cush.  337 264 

Britton  v.  The  Amer.  Build'g  and  Loan  Ass'n,  12  Phila.  430 ;  35  Leg.  Int. 

474 86,180 

Brogles  et  al.  v.  McCoy,  5  Sneed  (Tenn.)  602 118,  263 

Brolasky  v.  Miller,  1  Stockt.  (N.  J.)  807 359 

Brooks  v.  Dorsey,  4  Comst.  225 359 

Brouwer  v.  Appleby,  1  Sandf.  S.  C.  R.  158 -. 511 

Browning  v.  Morris,  Cowp.  790 355 

Buckley  v.  Briggs,  30  Mo.  452 255 

Buel  v.  Pumphrey,  2  Md.  268 435 

Buell  v.  Buckingham  &  Comp.,  16  la.  284 223,  226 

Build'g  Ass'n  v.  Benson  et  al.,  2  W.  N.  C.  (Pa.)  541 86,  235 

Build'g  Ass'n  v.  Britton,  7  W.  N.  C.  (Pa.)  330 85 

Build'g  Ass'n  v.  Ellster,  6  Phila.  6 86,  355 


XXX11  TABLE   OF   CASES  CITED. 

Build'g  ABS'D  v.  Eshlebach,  7  Phila.  189 86,  451,  4«g 

Bnild'g  Affi'n  t.  George,  3  W.  N.  C.  (Pa.)  239 88,  378,  397,  408 

Build'g  Aas'n  t.  Neurath,  2  W.  N.  C.  (Pa.)  95 8(5.  :i7S,  397 

Build'g  Afls'n  ».  O'Conner,  3  Phila.  453 SG,  359 

Build'g  Ass'n  r.  Reid,  3  Phila.  345 86,  451 

Build's  Aas'n  r.  Rice  and  wife,  8  W.  N.  C.  (Pa.)  12. 85,  314 

Build'g  Ass'n  v.  Rock,  9  Phila.  (Pa.)  75 86,  200 

Build'g  Ass'n  v.  Rowe,  15  Leg.  Int.  45 87,  451 

Build'g  Ass'n  v.  Schuller,  3  W.  N.  C.  (Pa.)  431 86,  146,  380, 

404>  405,  408,  416 

Build'g  Ass'n  r.  Seemiller,  35  Pa.  St.  225;  S.  C.,  3  Phila.  115 84,  309 

Build'g  Ass'n  v.  Timmins,  3  Phila.  209  86,  451 

Burbidge  u.  Cotton,  8  Engl.  L.  &  Eq.  57  ;  21  L.  J.  Ch.  201 ;  15  Jur.  1070  ,- 

5  DeG.  &Sm.  17 333,  335,  348 

Burbridge  v.  Norris,  34  L.  J.  Eq.  131 118 

Burlington  Mut.  Loan  Ass'n  v.  Heider  et  al.,  55  Iowa  424 29,  347,  378, 

379,  382,  397 

Burrall  v.  Bushwick  R.  R.  Comp.,  75  N.  Y.  211 438,  441,  442 

Burrill  v.  Nahant  Bank,  2  Mete.  (Mass.)  163 224 

Bury  t>.  Hartman,  4  S.  &  R.  (Pa.)  175 444 

Butchers'  Beneficial  Ass'n,  38  Pa.  St.  298 147 

C. 

Cabot  and  West  Springfield  Bridge  Co.  v.  Chapin  et  al.,  6  Gush.  (Mass.) 

50 440 

Cadbury  v.  Duval,  1  Am.  Law  Reg.  109 474 

Cahall  v.  Citizens'  Mut.  Build'g  Ass'n,  61  Ala.  232 83,  307 

Caldwell  t.  Ernest,  28  L.  J.  Ch.  810;  27  Beav.  39 305 

Campbell  v.  Baker,  2  W.  (Pa.)  83 263 

Campbell  v.  Johnson,  4  Dana  179 359 

Canal  Co.  v.  Railroad  Co.,  4  G.  &  J.  1 519 

Canton  Nat'l  Build'g  Aas'n  v.  Weber,  34  Md.  669 35,  297 

Card  v.  Carr,  1  C.  B.,  N.  S.  (87  Engl.  C.  L.  Rep.)  197 ;  26  L.  J.,  C.  P. 

113 136,147,223 

Carey  ».  Thi  Cincinnati,  &c.,  R.  Co.,  5  la.  357 519 

Carpenter  v.  Koons,  20  Pa.  St.  222 471,  472 

Carr  v.  Chartiers'  Coal  Company,  25  Pa.  St.  337 243 

Carr  v.  City  of  St.  Louis,  9  Mo.  191 243 

Cassebeer  et  al.  v.  Kalbfleisch,  4  N.  Y.  W.  Dig.  586 354 

Cefn  Cilcen  Min'g  Co.  (Lim.),  In  re  Edgworth's  Claim,  Law  Rep.,  7  Eq. 

88;  19  L.  T.  Rep.,  N.  S.,  593 296 

Chamberlain  v.  Chamberlain,  43  N.  Y.  424 301 

Chambersburg  Woolen  Co.  v,  Chambersburg  Manuf 'g  and  Build'g  Ass'n, 

31  Leg.  Int.  (Pa.)  357 86,  155,  489 

Champlin  v.  Tilley,  3  Dav  303 278 


TABLE  OF  CASES  CITED.  XXX1U 

Chandler  v.  Monmouth  Bank,  1  Green  (N.  J.)  255 246 

Chapleo  v.  Brunswick  Perra't  Build'g  Sotfy  et  al,  L.  R.  6  Q.  B.  696 296 

Cheeseborough  v.  Millard,  1  Johns.  C.  K.  409 475 

Chicago  Building  Society  v.  Crowell,  65  111.  453 18,  263,  381 

Chicago,  &c.,  R.  R.  Co.  v.  Howard,  7  Wall.  (U.  S.)  392 154 

Chillicote  Sav'gs  Ass'n  v.  Euegger  et  al.,  60  Mo.  218 58,  272 

Cincinnati  German  Build'g  Ass'n,  No.  3,  v.  Flach  et  al.,  1  Rep.  Cine.  Super. 

Ct.  468 80,  190,  371,  374 

Citizens'  Loan  Ass'n  of  Newark  v.  Lyon  et  al.,  2  Stewart  (N.  J.)  110.. ..63,  229 
Citizens'  Loan  Ass'n  of  the  City  of  Newark  v.  Nugent  et  al.,  11  Vroom  (40 

N.  J.  L.  R.)  215  64,  235 

Citizens'  Mut.  Loan  and  Accumulating  Fund  Ass'n  v.  Webster,  25  Barb. 

(N.  Y.)  263  ....  67, 145, 168, 185, 190,  208,  339, 369,  379,  384,  408,  426,  458 
Citizens'  Security  and  Land  Co.  of  Baltimore  City  v.  Uhler,  48  Md.  455...    35, 

39,  362 

City  Build'g  and  Loan  Ass'n  v.  Fatty,  1  Abb.  App.  Dec.  (N.  Y.)  347... .68,  190, 

318,  339,  368,  369,  379 

City  of  Davenport  v.  The  Peoria,  &c.,  Ins.  Co.,  17  la.  276 255 

City  v.  Given,  60  Pa.  St.  136 235 

City  Loan  and  Build'g  Ass'n  of  Augusta  et  al.  v.  Goodrich  et  al.,  48  Ga. 

445 107,  482,  502,  507 

Clark  v.  Turnpike  Co.,  13  Leg.  Int.  (Pa.)  156 273 

Clark  v.  Woollen  Manuf'g  Co.,  5  Wend.  (N.  Y.)  256 253 

Clarke  r.  Imperial  Gas  Co.,  4  B.  &  Ad.  315;  1  N.  &  M.  206 ;  24  Engl.  C. 

L.  Rep.  64 253 

Clarke  v.  Shee  &  Johnson,  Cowp.  197 354,  355 

Clarkville  Build'g  and  Loan  Ass'n  v.  Stephens,  11  C.  E.  Gr.  351 63,  272, 

337,  367,  368,  379,  402,  413 

Clinch  v.  Financial  Corporation,  L.  R.  5  Eq.  450;  L.  R.  4  Ch.  117 158 

Cochran  et  al.  v.  Arnold  et  al.,  58  Pa.  St.  399 513,  514,  516,  520 

Cockran  v.  Islam,  2  M.  &  S.  301 266 

Coetmor  Benefit  Build'g  Sotfy,  51  L.  T.  253 295 

Coil  v.  Pittsburgh  Female  College,  40  Pa.  St.  439 513 

Coles  v.  Trecoothick,  9  Ves.  234 266 

Collin  v.  Godfrey,  1  Barn.  &  Ad.  953;  20  Engl.  C.  L.  514 246 

Colonial  Life  Assurance  Co.  v.  Home  and  Colonial  Assurance  Co.  (Lira.) 

33  L.  J.  Ch.  741 ;  10  Jur.,  N.  S.,  967 ;  10  L.  T.  Rep.,  N.  S.,  448 ;  12 

W.  R.  783 118 

Colt  v.  Ives,  31  Conn.  25 447 

Columbia  Build'g  and  Loan  Ass'n  v.  Bellinger,  12  Rich.  Eq.  (S.  C.)  124...  107, 

342,  380 

Columbia  Build'g  Ass'n  v.  Dobbins,  15  Leg.  Int.  45 87,  450 

Columbian  Build'g  Ass'n  of  East  Baltimore,  No.  4,  v.  Crumb,  42  Md.  192... 

35,  209,  274,  374,  434 
Commercial  Bank  of  Bufialo  t>.  Kortright,  22  Wend,  (N.  Y.)  348 267 

C 


TABLE  OP  CASES  CITED. 

Committee  v.  Morris,  1  Phila.  411 511 

Commonwealth  v.  German  Soc'y,  15  Pa.  St.  261 147 

Commonwealth  v.  Penna.  Beneficial  Institution,  2  S.  &  R.  (Pa.)  141 147 

Commonwealth  v.  St.  Patrick  Soc'y,  2  Binn.  (Pa.)  441 147 

Commonwealth  v.  Watmough,  6  Whart.  (Pa.)  117 444 

Commonwealth  v.  Woelper,  3  S.  &.  R.  (Pa.)  29 216 

Commonwealth  Insurance  Co.  v.  Crane,  6  Mete.  (Mass.)  64. •_'  1 1 

Congregational  Soc'y  in  Troy  v.  C.  Perry,  6  N.  H.  164. 518 

Conro  v.  Port  Henry  Iron  Co.,  12  Barb.  (N.  Y.)  27 225 

Conrow  v.  Tradesmen's  Sav.  Fund  and  Loan  Ass'n,  21  Leg.  Int.  109 87 

Conway  v.  Log  Cabin  Perm't  Build'g  Ass'n  of  Baltimore  City,  52  M<1. 

137 35,  164,260,277 

Conwell  v.  Pumphrey,  9  Ind.  135 :',',(! 

Cook  v.  Kent,  105  Mass.  246 40,  482,  500,  502,  504 

Cooke  v.  State  Bank,  52  N.  Y.  96 i^t 

Cooley's  App.,  1  Grant  (Pa.)  401 361,  472,  473 

Corn  Exchange  Bank  v.  Cumberland  Coal  Co.,  1  Bosw.  436 266 

Costen's  App.,  1  Harris  (Pa.)  292 442 

Cottrell  v.  Stratum,  28  L.  T.  Rep.,  N.  S.,  218 ;  L.  R.  8  Ch.  App.  295;  21 

W.  R.  234;  42  L.  J.  Ch.  417  ;  37  J.  P.  4 209 

Cover  v.  Black,  1  Pa.  St.  493 474 

Cox  ».  Leech,  1  C.  B.,  N.  S.,  617 ;  S.  C.,  26  L.  J.,  C.  P.  125 ;  3  Jur.,  N.  S., 

442;  87  Engl.  C.  L.  Rep.  617 232 

Craig  t-.  Gregg,  83  Pa.  St.  19 221,  230 

Crook  v.  Jewett,  12  How.  Pr.  (N.  Y.)  19 227 

Cruikshank  t>.  Duffin,  13  L.  R.,  Eq.  555 ;  41  L.  J.,  Ch.  317 ;  20  W.  R.  354 ; 

26  L.  T.,  N.  S.,  121 316 

Crystal  Lake  Ice  Co.  v.  Adm'r  of  Backus,  32  111.  82 329 

Cummins  v.  Evir,  2  Halst.  Ch.  (N.  J.)  73 359 

Cushman  v.  Thayer  Jewelry  Manuf'g  Co.,  76  N.  Y.  365 445 

Cutbill  v.  Kingdom,  1  Exch.  494;  17  L.  J.  Exch.  177 158,  162, 

165, 166,  312,  335 

D. 

Damon  v.  Granby,  2  Pick.  (Mass.)  345 253 

Dannebroge  Min'g  Co.  v.  Ailment  &  Barrett,  26  Cal.  286 514 

D'Arcy  v.  Tamar,  Kithill  and  Callington  Railway  Co.,  Law  Rep.,  2  Exch. 

158  ;  14  L.  T.  Rep.,  N.  S.,  626 225,  "254 

Davies  &  Co.  v.  Creighton,  33  Grattan  (Va.)  696 83,  95,  96,  97 

Davis  v.  West  Saratoga  Build'g  Union,  No.  3,  32  Md.  285 35,  297 

Decker  v.  Freeman,  3  Greenl.  (Me.)  338 253 

Delano  v.  Wild  et  al.,  6  Allen  (Mass.)  1 39,  328,  337,  338,  364, 

368,  379,  452,  458,  524 

Delaware  Build'g  Ass'n  v.  Keller,  2  W.  N.  C.  (Pa.)  29 86,  379 

De  Lisle  v.  Priestman,  1  Browne  176 447 


TABLE  OF  CASES  CITED.  JLXXV 

Denny  v.  West  Phila.  Sav'g  and  Build'g  Ass'n,  39  Pa.  St.  154. 84,  126,  345 

Derby  Canal  Co.  v.  Wilmot,  9  East  360 253 

De  Wolf  v.  Johnson,  10  Wheat.  (U.  S.)  367 354 

Diligent  Fire  Co.  v.  Commonwealth,  75  Pa.  St.  291 147 

Dime  Savings  Institution  v.  Mulford,  4  Stew.  (N.  J.)  99 363 

Dinsmore  v.  Duncan,  57  N.  Y.  573 254 

Dix  r.  Van  Wyck,  2  Hill  (N.  Y.)  522 359 

Dobinson  v.  Hawks,  12  Jur.  1037  ;  S.  C.,  16  Sim.  407 ;  12  L.  T.  Rep.  238 ; 

39  Engl.  CJi.  Rep.  406 135,  225,  443 

Dodge  v.  Perkins,  9  Pick.  368 268 

Doe  v.  Roll,  7  Ham.  (Ohio)  401.. 311 

Duncaster  Perm't  Build'g  Sotfy,  In  re,  Law  Rep.,  3  Eq.  158 ;  15  L.  T.  Rep., 

N.  S.,270;  15  W.  R.  102;  31J.  P.  310 211 

Dove  v.  Young,  7  Macph.  304 441 

Duke  r.  Cahawba  Nav.  Co.,  10  Ala.  82 443 

Dimston  r.  Imperial  Gas  Co.,  3  Barn.  &  Ad.  125;  23  Engl.  C.  L.  Rep.  42..  246 
Durham  County  Perm't  Benefit  Build'g  Soc'y,  In  re,  Davis'  Case,  Wilson's 

Case,  L.  R.,  12  Eq.  516;  25  L.  T.,  N.  S.,  83 296,  305,  306,  317,  335 

Dutch  West  India  Co.  v.  Henriques,  2  Ld.  Ray.  1535 272 

Dutcher's  Cotton  Manufactory  v.  Davis,  14  Johns.  (N.  Y.)  238 272,  520 

Dyer  &  Co.  v.  Walker,  40  Pa.  St.  157 513 

Dykers  v.  Allen,  7  Hill  (N.  Y.)  498 447 

E. 

Eagle  Beneficial  Soc'y's  Appeal,  75  Pa.  St  Rep.  226 360,  415 

Early  &  Lane's  App.,  8  Norris  (89  Pa.  St.)  411 85,  185,  447, 

451,  453,  461,  469 

East  Anglian  R.  Co.  v.  Lythgoe,  10  C.  B.  (70  Engl.  C.  L.  Rep.)  726 244 

Eastwood  v.  Lever,  4  DeG.,  J.  &  S.  114;  9  L.  T.  Rep.,  N.  S.,  615. 221,  278 

Economy  Build'g  Ass'n  to  the  use  of  Smyth  v.  Hungerbuehler,  12  Norris 

(93  Pa.  St.)  258;  9  W.  N.  C.  (Pa.)  218 85,  451,  453,  455,  467 

Edelyn  et  al.  v.  Pascoe  et  al.,  22  Grattan  (Va.)  826 97,  486,  487,  495 

Edgerly  v.  Emerson,  3  Eost.  555 223 

Kdwards  v.  Bates,  13  L.  J.,  C.  P.  156;  8  Jur.  539;  8  Scott  N.  R.  406;  2 

D.  &  L.  299 427 

I'xlwards  v.  Fairbanks,  27  La.  Ann.  449 310 

Ellery  v.  Cunningham,  1  Mete.  112  268 

Elwell  v.  Dodge,  33  Barb.  (N.  Y.)  336 310 

Elwes  v.  Ogle,  2  Engl.  L.  &  Eq.  379 244 

Ely  v.  McClung,  4  Port.  (Ala.)  128 354 

Emerson  v.  Blonden,  1  Esp.  142 258 

Entwistle  v.  Davis,  36  L.  J.  Ch.  825;  L.  K,  4  Eq.  272 441 

Evans  v.  Bicknell,  6  Vea.  173 267 

Evans  v.  Coventry,  3  W.  R.  149 ;  24  L.  T.  Rep.  186 ;  19  J.  P.  37.. 230 


XXXVI  TABLE  OF   CASES  CITED. 

Evans  t-.  Hearts  of  Oak  Friendly  Society,  12  Jur.,  N.  8.,  163 237 

Evans  v.  Thibault,  2  Miles  (Pa.)  251 466,  47ft 

Everham  v.  Oriental  Sav'g  and  Loan  Ass'n,  47  Pa.  St.  352 ;  8.  C.,  5  Phila. 

62 84,142 

Everhart  v.  West  Chester  and  Phila.  E.  R.  Co.,  28  Pa.  St.  339 148 

Excelsior  Build'g  Ass'n  v.  Commonwealth,  10  W.  N.  C.  (Pa.)  161 85,  476 

Ex'reof  Howell  v.  Auten,  1  Gr.  Ch.  R.  (N.J.)45 232,362 

Eyre  ».  Build'g  Ass'n,  17  Leg.  Int.  (Pa.)  148 87,  171,  203,  291 

F. 
Farmer  t>.  Smith,  4  H.  &  N.  196 ;  5  Jur.,  N.  8,  533  n;  28  L.  J.  Exch.  226 ; 

32  L.  T.  Rep.  371 ;  7  W.  R.  362 143,  190,  199 

Faulkner's  Appeal,  11  W.  N.  C.  (Pa.)  48 85,  251,  299,  301,  307 

Fed.  Insurance  Co.  v.  Robinson,  3  N.  Y.  W.  Dig.  431 355 

Ferris  r.  Crawford,  2  Denio  (N.  Y.)  595 465,  472 

Fisher  v.  Kahlnan,  3  Phila.  213  86,  359 

Fitzherbert  v.  Mather,  1  T.  R.  12 267 

Flanders  t.  Jones,  10  N.  H.  160 359 

Fleckner  v.  Bank  of  the  United  States,  8  Wheat.  338 259 

Fleming  v.  Parry,  12  Harris  (Pa.)  47 428 

Fleming  v.  Self,  18  J.  P.  296 ;   23  L.  T.  Rep.  63 ;   Kay.  518 ;  S.  C.  upon 

appeal,  24  L.  J.,  Ch.  29 ;   18  J.  P.  772 ;   24  L.  T.  Rep.  101 ;   1  Jur., 

N.  S.,  25;  S  De  G.,  M.  &  G..  997  •  3  Eq.  Rep.  14;  3  W.  R.  89 119, 

170.  189.  190,  196,  197,  198,  199,  370,  430 

Flounders  v.  Hawley,  78  Pa.  St.  45 84,  381,  382 

Forney's  App.,  59  Pa.  St.  398 444 

Forest  City  United  Land  and  Build'g  Ass'n  v.  Gallagher  et  al.,  25  Ohio  St. 

208..." 80.  184.  145.  S09,  378,  379,  380,  382,  397,  407,  410 

Fort  Wayne  v.  Jackson,  7  Blackf.  (Ind.)  36 269 

Foster  v.  Essex  Bank,  17  Mass.  497  219 

Franklin  Build'g  Ass'n  v.  Marsh,  5  Dutch.  (N.  J.)  225.... 63,  112,  338,  379,  385 

Franklin  Bnild'g  Ass'n  v.  Mather.  4  Abbott  Pr.  (N.  Y.)  274 68,  350,  378, 

415,  422,  426 

Franz  t-.  Teutonic  Build'g  Ass'n,  No.  2,  24  Md.  259 34,  273,  349,  520 

French  v.  Barren,  2  Atk.  120 432 

Fritz  r.  Commiss'rs  of  Montg*y,  17  Pa.  St.  130 273 

Frostburg  Mut.  Build'g  Ass'n  v.  Brace  et  al.,  51  Md.  508 35,  264 

Frostburg  Mut.  Build'g  Ass'n  v.  Lowdermilk,  50  Md.  175 35,  432 

Frostburg  Build'g  Ass'n  et  al.  v.  Stark  et  al.,  47  Md.  338 35,  487,  488 

Fuller  v.  Hooper,  3  Gray  (Mass.)  334 264 

Fuller  v.  Salem  and  Danvers  Loan  and  Fund  Ass'n,  10  Gray  (Mass.)  94.  39,  173 

G. 

Ganster  r.  Homestead  Build'g  Ass'n,  unrep.  dec.  of  Supr.  Ct.  of  Penna., 

East.  Distr.,  on  error  to  C.  P.  of  Berks  County,  1881 521 

Garrett  v.  Dillsbury  and  Mechanicsburg  R.  R.  Co.,  78  Pa.  St.  465 140,  514 


TABLE   OF   CASES  CITED. 

tiobhwiler  v.  Willis,  33  Cal.  11 225 

Gass  v.  Citizens'  Build'g  and  Loan  Ass'n,  9  W.  N.  C.  (Pa.)  326... 85,  260,  262,  272 

German  Fair  Hill  Build'g  Ass'n  t;.  Metzger,  3  W.  N.  C.  (Pa.)  204. 86,  143, 

209,  274,  373 

German  Min'g  Co.,  In  re,  22  L.  J.,  Ch.  956 ;  4  De  G.,  M.  &  G.  19 296 

German  Union  Build'g  and  Sav.  Fund  Ass'n  v.  Sendmayer,  50  Pa.  St.  67...     84, 

135,"  225,  277,  442,  443,  446 

Germania  Build'g  Ass'n  v.  Neill,  12  Norris  (93  Pa.  St.)  322... 85,  427,  428,  451 
Giblin  v.  McMullen,  38  L.  J.,  P.  C.  25 ;  2  P.  C.  317 ;  21  L.  T.  Kep.,  N.  S., 

214;  17  W.  E.  445 219 

Gilpin  v.  Howell,  5  Barr.  (Pa.)  57 442 

Ginz  v.  Stumph,  73  Ind.  209 23,  376,  452 

Glass  v.  Warwick,  4  Wright  (Pa.)  140 315 

Glover  et  al.  v.  Giles  et  al.,  L.  E.  18  Ch.  173 486,  513 

Glynn  et  al.  v.  Home  Build'g  Ass'n,  22  Kas.  746 190,  336 

Goldbold  v.  Bank  of  Mobile,  11  Ala.  191 :>43 

Goldsmith,  In  re,  Ex  parte  Osborne,  L.  E.  10  Ch.  41 186 

Good  v.  Grant,  76  Pa.  St.  52 358,  361 

Goodrich  et  al.  v.  The  City  Loan  and  Build'g  Ass'n  of  Augusta  et  al.,  54 

Ga.  98 107,482,487,507 

Gordon  v.  Preston,  1  Watts  (Pa.)  385 253,  263 

Gordon,  &c.,  v.  Winchester  Build'g  and  Accumulat'g  Fund  Ass'n,  12  Bush 

(Ky.)  110 107,  133,  162,  251,  281,  344,  379,  397,  485 

Gormerly  v.  The  Port  Eichmond  Build'g  and  Loan  Ass'n,  3  W.  N.  C. 

(Pa.)  11 86,  478,  479,  488,  494 

Gosling  v.  Veley,  12  Q.  B.  347 284 

Gourdon  v.  Insurance  Co.  of  North  America,  1  Binney  (Pa.)  430 444 

Grant  v.  Mechanics'  Bank,  13  S.  &  E.  (Pa.)  140. 141 

Gravestine's  App.,  13  Wright  (49  Pa.  St.)  310 229,  230 

Gray's  Ex'rs  v.  Brown,  22  Ala.  262 ^ 358 

Greaves  v.  Gouge,  69  N.  Y.  154 230,  231 

Green  ».  Kemp,  13  Mass.  515 359 

Greenough  v.  Greenough,  1  Jones  (Pa.)  495 127 

Grimes  v.  Harrison,  28  L.  J.  Ch.  823;   33  L.  T.  Eep.  115;   5  Jur.,  X.  S., 

528;  26  Beav.  435;  23  J.  P.  421 158,  218,  221,  230,  231,  302 

Gwinner  v.  The  Lehigh  &  Delaware  Gap  E.  E.  Co.,  55  Pa,  St.  126 83 

H. 

Hager  v.  Cleveland  &  Bassett,  36  Md.  476 140,  440 

Hagerman  et  al.  ".  Ohio  Build'g  and  Sav.  Ass'n,  25  Ohio  St.  186 80,  142, 

145,  165,  184,  187,  189,  190,  208,  211,  279,  290,  347,  350, 
365,  371,  379,  407,  409,  410,  416,  426,  479,  495,  498,  520 

Hamilton  v.  Smith,  28  L.  J.,  Ch.  404 118 

Hamilton  Build'g  Ass'n  v.  Eeynolds,  5  Duer  (N.  Y.)  671 67,  350,  378,  434 


XXXV111  TABLE   OF   CAS13S  CITED. 

Hundley  v.  Farmer,  29  Beav.  362 142,  190,  199,  483 

Hanner  et  al.  v.  Greensboro  Build'g  and  Loan  Ass'n,  78  N.  C.  188  ....  77,  342. 

368,  380 
Uaii-lniry,  Treasurer  Germantown  Build'g  Ass'n,  v.  Pfeiffer  &  Schaufl'ele, 

]•_'  I'liila.  2-V);   35  Leg.  Int.  395;  S.  C.,  nom.  Link  r.  Germantown 

Build'g  Ass'n,  89  Pa.  St.  15 86 

IlmiM-ll  v.  Lutz,  20  Pa.  St.  284 361,  471,  472 

Haw-on  v.  Derby,  2  Vern.  392 431 

J  lardy  r.  Metropolitan  Land  and  Finance  Company,  L.  R.,  7  Ch.  App.  427  ; 

41  L.  J.,  Ch.  207  ;  20  W.  R.  225 ;  26  L.  T.,  N.  S.,  407  ;  reversing  S.  C., 

L.  R.,  12  Eq.  386 316 

Hardy  v.  Reeves,  4  Yes.  480 431 

Harford  v.  U.  S.,  8  Cranch  109 83,  96 

Harnier  v.  Gooding,  13  Jur.  400 ;  3  De  G.  &  S.  407 ;  13  L.  T.  Rep.  134. .  .221,  230 

Harris  v.  The  Muskingum  M.  Comp.,  4  Blackf.  (Ind.)  267 272 

Harrison  v.  Hannel,  5  Taunt.  784;  1  Engl.  C.  L.  Rep.  263 358 

Haying's  Case,  10  Watts  (Pa.)  303 465,  471 

Haven  r.  Low,  2  N.  H.  13 448 

Hawkeye  Benefit  and  Loan  Ass'u  v.  Blackburn  et  al.,  48  Iowa  385 29,  141, 

347,  378,  379,  382,  397 
Hekelnkaemper  et  al.  v.  The  German  Build'g  and  Sa.v'g  Ass'n,  22  Kas. 

549 31,  185,  187,  190,  208,  291,  336,  452,  479,  511 

Hennighausen  and  Wolff.  Rec'rs,  v.  Tisher,  50  Md.  583 35,  174,  175, 

190,  208,  275,  277,  431 

Henry  v.  Rutland  R.  Co.,  27  Vt.  435 246 

Herbert,  &c.,  v.  Kenton  Build'g  and  Sav'g  Ass'n  of  Covington,  11  Bush 

(Ky.)  296 107,  123,  162,  185,  250,  280,  344,  379,  397 

Herbert  v.  The  Mechanics'  Build'g  and  Loan  Ass'n  of  New  Brunswick  et 

al.,  2  C.  E.  Gr.  (N.  J.)  497 63,  151,  184,  190,  251, 

447,  448,  452,  457,  464,  465,  473 

Herder  v.  Pinkerton,  14  Allen  381 253 

Herod  v.  Rodman,  16  Ind.  241 263 

Hiester  v.  Fortner,  2  Binney  (Pa.)  40 473 

Hill  v.  Featherstonhaugh,  7  Biugh.  569 ;  20  Engl.  C.  L.  Rep.  244 232 

Hoboken  Build'g  Ass'n  v.  Martin,  2  Beas.  (N.  J.)  428 64,  112,  139, 

153,  172,  189,  190,  202,  204,  215,  216,  232,  269,  273,  291, 
309,  338,  350,  362,  379,  383,  452,  478,  480,  488,  505,  513 

Hodges  v.  Rutland  R.  Co.,  29  Vt.  220 246 

Ho'gan  v.  Guigon,  Judge,  29  Grat.  (Va.)  705 83,  95 

Holbrook  v.  Baker,  5  Greenl.  (Me.)  309 448 

Holland  v.  Cruft,  3  Gray  (Mass.)  173 526 

Holt  v.  Bodey,  18  Pa,  St.  Rep.  207 471,472 

Hopcroffi  v.  Parker,  16  L.  T.  Rep.,  N.  S.,  123,  561 , 118 

Hopkins  t>.  Baker's  Adm'r  et  al.,  2  P.  &  H.  (Va.)  110 232,  362 

Hopkins  v.  Mehaffey,  11  S.  &  R.  (Pa.)  126 220 


TABLE  OF   CASES  CITED.  XXXIX 

«.  LiVx&fcairs-'  fcuild'g  au^  ~s:v\  ASE'C,  84  N.  C.  838 77,  185, 

190,  342,  450 

Houfier  r.  Hermann  Build'g  A<*'n,  U  Fa.  St.  478 84,  126 

Howard  Mui.  Loan  and  Fund  Ass'n  v.  Mclntire,  3  Allen  (Mass.)  571 39, 

137,  312,  522 

Unwell  v.  Commonwealth,  ex  rel.  Keppleman,  97  Pa.  St.  332 233 

Hudson  City  Sav'gs  Institute  v.  McArthur  et  al.,  8  N.  Y.  W.  Dig.  63 315 

Hughes's  App.  30  Pa.  St.  471 84,  108,  126,  359,  451,  470 

Hughes  v.  D'Eyncourt,  3  N.  R.  420 290,  301,  307 

Hughes  v.  Layton  or  D'Eyncourt,  10  Jur.,  N.  S.,  513 ;  33  L.  J.,  M.  C.  89 ; 

12  W.  R.  408 ;  9  L.  T.,  N.  S.,  383;  4  B.  &  8.  820;   116  Engl.  C.  L. 

Rep.  819 290,  301,  307 

Hunter  v.  Caldwell,  16  L.  J.,  Q.  B.  274;  S.  C.,  11  Jur.  770;  10  Q.  B.  69...  232 

Huntress  v.  Patten,  20  Me.  28. 358 

Hutton  v.  Thompson,  and  Norris  v.  Cooper,  3  H.  L.  Cas.  161 ;  S.  C.,  17  L. 

T.  Rep.  237 '. 117 

L 

Importing  and  Exporting  Co.,  &c.,  v.  Locke,  50  Ala.  332 513 

Ingoldby  v.  Riley,  28  L.  T.,  N.  S.,  55 145,  413 

Inhabitants  of  Upper  Alloways  Creek  v.  String,  5  Ealst  (N.  J.)  323 269 

Insurance,  In  re,  22  Wend.  (N.  Y.)  597 223 

Insurance  Co.  v.  Connor,  17  Pa.  St.  136 283 

Irvine  v.  Lumbermen's  Bank,  2  Watts  &  Serg.  (Pa.)  190 513 

J. 

Jackson  v.  Campbell,  5  Wend.  (N.  Y.)  572 253,  254 

Jackson  et  al.  v.  Myers  et  al.,  43  Md.  452 35,  254,  297 

James  v.  Nat'l  Build'g  Ass'n,  9  W.  N.  C.  (Pa.)  325 ;  see  S.  C.,  nom.  Jones 

v.  Nat'l  Build'g  Ass'n,  94  Pa.  St.  215 85,  260,  262 

James  v.  Woodruff,  10  Paige  (N.  Y.  Ch.  Rep.)  541 ;  S.  C.,  2  Denio  474 444 

Jarrett  v.  Cope,  68  Pa.  St.  Rep.  67 2,  108,  161,  346,  349,  379,  403,  524 

Jeffries  v.  Life  Insurance  Co.,  22  Wall.  (U.  S.)  47 153,  320 

John  v.  Reardon,  11  Md.  465  474 

Johnson  v.  Cunningham,  1  Ala.,  N.  S.,  249 266 

Johnston's  Estate,  9  Casey  (Pa.)  511 83 

Johnston  v.  Scott,  22  Dunlop,  393  ;  32  Sc.  Jur.  174 118 

Jones  v.  Dana,  24  Barb.  (N.  Y.)  402 513 

Jones  v.  National  Building  Ass'n,  9  W.  N.  C.  325 ;  94  Pa.  St.  215.... 85,  260,  262 

Juniata  Build'g  and  Loan  Ass'n  v.  Mixell,  3  Norris  (84  Pa.  St.)  313 84,  144, 

165,  311,  315,  378,  383,  402,  415 
K. 

TCehler  v.  Miller,  4  Leg.  Gaz.  126;  S.  C.,  1  Leg.  Chron.  35 88 

Kellner  v.  Baxter,  L.  R.,  2  C.  P.  174 117,  118,  263 

Kelly  v.  Accommodation  Sav'g  Fund  and  Loan  Aas'n,  2  Phila.  237. ..86,  451,  4£5 


xl  TABLE   OF   CASES  CITED. 

Kelly  v.  Mobile  Building  and  Loan  Ass'n,  64  Ala.  501 14,  310 

Keily  t>.  Perseverance  Build'g  Ass'n,  39  Pa.  St.  148 84,  451 

Kelly  v.  Rosenstock,  45  Md.  389 264 

Kelsall  v.  Tyler,  30  J.  P.  151 ;  11  Exch.  513;  25  L.  J.,  Exch.  153;  26  L. 

T.  Rep.  226 131 

Kelsey  v.  Nat'l  Bank  of  Crawford  County,  69  Pa.  St.  426 263 

Kendall,  Ex  parte,  17  Vea.  514 464 

Kennedy  ».  Cotton,  28  Barb.  59 272 

Kennedy's  Ex're  v.  Ware,  1  Pa.  St.  445 245 

Kent  Benefit  Build'g  Society,  In  re,  1  Drew.  &  Sm.  417 ;  7  Jur.,  N.  8., 

1045  ;  30  L.  J.,  Ch.  785 ;  9  W.  R.  686 ;  4  L.  T.  Rep.,  N.  S.,  610 ;  25 

J  P.  8051 108,  219,  220,  287,  301,  304,  305,  306 

Kent  v.  Quicksilver  Min'g  Co.,  78  N.  Y.  159 202,  262,  283,  287 

Kidder  v.  Bedford  County,  7  Serg.  &  Rawle  (Pa.)  386 247 

Kilpatrick  v.  Penrose  Ferry  Bridge  Co.,  49  Pa.  St.  118 245 

King  i'.  Cator,  2  Burr.  2026 83 

King  v.  Davis,  1  Leach's  Cases,  306 83 

King  v.  Passmore,  3  T.  R.  244 ;  1  Rolle's  Abr.  514;  4  Com.  Dig.  273 519 

Kingsessing  Build'g  Ass'n  ».  Roan,  9  W.  N.  C.  (Pa.)  15 85,  315,  451,  469 

Kinziew.  Chicago,  2  Scam.  (111.)  188 254 

Kisterbock  v.  Premium  Build'g  Ass'n,  7  Phila.  (Pa.)  185 86,  499 

Kislerbock's  App.,  51  Pa.  St.  485 84,  229,  492,  500 

Kittera's  Estate,  17  Pa.  St.  424 452 

Knell  v.  Green  Street  Build'g  Ass'n,  34  Md.  67 35,  474 

Knickerbocker  Life  Ins.  Co.  v.  Nelson  et  al.,  6  N.  Y.  W.  Dig.  145 358 

Knoblauch  v.  Build'g  Ass'n,  8  Pitteb.  Leg.  Jour.,  N.  S.,  (Pa.)  39 87,  149 

Knox  ».  Shepherd,  2  L.  T.  Rep.,  N.  S.,  351 131 

Kochler  v.  Iron  Co.,  2  Black.  715 226,  264 

Kortright  v.  Buffalo  Commercial  Bank,  20  Wend.  (N.  Y.)  91 ;  S.  C.,  in 

error,  22  Id.  348 442,  446 

Kreamer  v.  Springfield  Build'g  Ass'n,  6  W.  N.  C.  (Pa.)  267 86,  451,  469 

Kupfert  t>.  Guttenberg  Build'g  Ass'n,  30  Pa.  St.  465 84,  108,  126,  161,  187, 

189,  327,  345,  349,  359,  451,470 

L. 

I^aing  v.  Reid,  L.  R.,  5  Ch.  App.  4 ;  18  W.  R.  76 ;  39  L.  J.,  Ch.  1 ;  21  L.  T., 

N.  S.,  773;  34  J.  P.  134 291,  292,  295,  296 

Lamberton  t>.  Logan,  2  Binney  (Pa.)  257 127 

L'iniiu  t-.  Port  Deposit  Homestead  Association  of  Cecil  County,  49  Md. 

233 35,  261,267 

Lamoihe  County  Nat'l  Bank  v.  fiingham,  50  Vt  105 358,  359 

1. lining  t).  Eddy,  1  Johns.  Cn   (N.  Y.)  49 361 

Larkins'  Appeal.  38  Pa.  St.  457  ;  4  Phila.  95 84,  266,  277 

l-rtLain  and  *ife  v  Washington  Buil  i'g  and  Loan  Ass'n,  77  N.  C.  145 77, 

133,  162,  251,  281,  342,  357,  380 


TABLE   OF   CASES  CITED.  xli 

Laussat '..  Lippincott,  6  Serg.  &  Rawle  (Pa.)  386 266 

Leffingwell  v.  Elliott,  8  Pick.  455 52C 

Leffman  v.  Flanigan,  5  Phila.  155,  419 86,  221,  228,  229,  230 

Leggett  v.  New  Jersey  Bank'g  Co.,  Saxton's  Ch.  (N.  J.)  541  253 

Legrand  v.  Hampton-Sidney  College,  5  Munf.  (Va.)  324 254 

Lehigh  Bridge  Co.  v.  Lehigh  Coal  and  Navigation  Co.,  4  Kawle  (Pa.)  9...  273 
Lethbridge  v.  Kirkman,  25  L.  J.,  Q.  B.  89 ;  S.  C.,  2  Jur.,  N.  S.,  372 ;  26 

L.  T.  Rep.  122 305 

Licking  County  Sav.  Loan  and  Build'g  Ass'n  v.  Bebout's  Adrn'r  et  al.,  25 

Ohio  St.  252 80,  379,  383 

Lincoln  Build'g  and  Sav.  Ass'n,  app'ee,  v.  Benjamin  &  Benjamin,  app'te,  7 

Neb.  181 61,  122,  126,  185,  343,  350,  380,  4.03,  485,  513 

Lincoln  Build'g  and  Sav.  Ass'n,  app'ee  v.  Graham,  app't,  7  Neb.  173... 61,  122, 

126,  145,  185,  343,  350,  380,  403,  485,  613 
Lincoln  Build'g  and  Sav.  Ass'n,  app'ee,  v.  Haas  et  al.,  app'ts,  10  Neb. 

581 62, 145,  415,  432 

Link  v.  Germantown  Build'g  Ass'n,  89  Pa.  St.  15 85,  86,  346,  349,  359, 

360,  361,  403,  451,  455,  467,  472,  524 

Lister  v.  Log  Cabin  Build'g  Ass'n,  38  Mi  115 35,  184,  189,  190, 

335,  436,  495,  496,  498 

Liverpool,  &c.,  Build'g  Soc'y,  In  re,  McCowan's  Claim,  15  S.  J.  177 295 

Lloyd  v.  Galbraith,  32  Pa.  St.  103 465,  471 

Lloyd  v.Scott,  4  Peters  (U.  S.)  205 364,  359 

Loan  Ass'n  v.  Stonemetz,  25  Pa.  St.  Rep.  534 84,  245,  246 

Loan  Co.  v.  Everham,  5  Phila.  62;  47  Pa,  St.  352 84 

Locke  v.  Stearns,  1  Mete.  560 267 

Lodge  v.  Lysely,  4  Sim.  70;  6  Engl.  Ch.  Rep.  37 474 

Long  v.  Orsi,  18  C.  B.  610 ;  S.  C.,  26  L.  J.,  C.  P.,  127 ;  86  Engl.  C.  L.  Rep. 

610 232 

Loomis  v.  Eaton,  32  Conn.  550 359 

Lord  v.  Bigelow,  8  Vt.  445 273 

Lord  v.  Ocean  Bank,  15  Pa.  St.  386 451 

Lord  &  Robinson  v.  Essex  Build'g  Ass'n,  No.  4,  37  Md.  320 35,  281, 

349,  513,  515 

Lothrop  r.  Stedman,  42  Conn.  583 231 

Love  v.  Build'g  and  Loan  Ass'n,  11  W.  N.  C.  (Pa.)  303 85,  276 

Lovejoy  r.  Mulkarn,  37  L.  T.,  N.  S.,  77 ;  46  L.  J.,  Ch.  Div.,  630...  145,  406,  407 

Lovett  v.  The  Steam  Saw  Mill  Ass'n,  6  Paige  Ch.  54 253 

Low  r.  Connecticut  Railr.  Co.,  45  N.  H.  375 247 

Low  Street  Build'g  Ass'n,  No.  6,  &c.,  v.  Zucker,  48  Md.  448 35,  389. 

502,  507,  509 

Lucas  v.  Greenville  Build'g  and  Sav.  Ass'n,  22  Ohio  St.  339 79,  520 

Ludlow  v.  Simond,  2  Caines  Cases  in  Error  1 235 

Lyle  v  Barker,  5  Binney  (Pa.)  457 448 


TABLE   OF   CASES   CITED. 


M. 

Madden  v.  McMullen,  13  Ir.  C.  L.  Rep.  305;  4  L.  T.  Rep.,  N.  S.,  180 233 

Maddick  v.  Marshall,  17  Com.  B.,  N.  S.,  829  (112  Engl.  C.  L.  R) 118 

Maisrh  P.  Seamen's  Say.  Fund  Soc'y,  5  Phila,  30 228,  229 

Manahan  r.  Varnum,  11  Gray  (Mass.)  405 39,  525,  526 

Maniilarturere'  and  Mechanic's'  Sav.  and  Loan  Co.  v.  Conover,  5  Phila. 

(Pa.)  18 86,  165,  251,  252,  289,  291,  310,  311,  484,  513 

Manufacturers'  and  Mechanics'  Sav.  and  Loan  v.  Odd  Fellows'  Hall  Ass'n 

of  Spring  Garden,  48  Pa.  St.  446  84,  235 

Marble  Build'g  Ass'n  v.  Hooker,  3  Phila.  494 86,  126 

Marietta  Bilild'g  Ass'n  ?'.  Hanlen,  10  Lane.  B.  (Pa.)  47 87 

Martin  v.  Nashville  Build'g  Ass'n  et  al.,  2  Cold.  (Tenn.)  418. ..107, 123, 133, 162, 

251,  279,  280,  281,  343,  380,  397,  485 
Maryland  Perm't  Land  and  Build'g  Soc'y  of  Baltimore  v.  Smith  et  al.,  41 

Md.  516 35,  362 

Massey  v.  The  Citizens'  Build'g  and  Sav.  Ass'n  of  Paola,  Kas.,  22  Kas. 

624 31,  140,  207,  289,  311,  335,  375,  376, 

377,  378,  379,  383,  402,  415,  439,  462,  514 
Matterson  t>.  Elderfield,  L.  R.,  4  Ch.  App.  207 ;  17  W.  R.  422 ;  20  L.  T., 

N.  S.,  503;  33  J.  P.  326  207,  210,  221,  373,  401,  458 

Matthew  v.  Blackmore,  26  L.  J.,  Ex.  150;  S.  C.,  1  H.  and  N.  761 427 

Maule  v.  Build'g  Ass'n,  5  Phila.  421 86,357 

McCahan  v.  Columbian  Build'g  Ass'n  of  East  Baltimore,  No.  2,  40  Md. 

226 35,  147,  190,  374,  402,  423,  425,  428,  430 

McCoole  v.  Smith,  1  Black.  (U.  S.)  59,  470 -. 83,  96 

McCormick's  App.,  57  Pa.  St.  54 465,  476 

McCullough  v.  Moss,  5  Den.  (N.  Y.)  567 225 

McDevitt  &  Hay's  App.,  70  Pa.  St.  373 465,  471 

McGrath  v.  Hamilton  Sav.  and  Loan  Ass'n,  44  Pa,  St.  383.... 84,  141,  148,  150, 

188,  207,  451,  455,  457 

McLaughliu  v.  Citizens'  Build'g,  Loan  and  Savings  Ass'n,  62  Ind.  264... 23,  28, 

128,  347,  350,  379,  513 

Mechanics'  Bank  v.  Edwards,  1  Barb.  271 358 

Mechanics'  Build'g  and  Loan  Ass'n  of  New  Brunswick  v.  Conover  et  al., 

1  McCart.  (N.  J.)  219 63,  151,  158,  184,  190, 

192,  447,  451,  455,  457,  458,  463 

Mechanics'  Building  Ass'n  v.  Stevens  et  al.,  5  Duer  (N.  Y.)  676  ...  67,  349,  513 
Mechanics'  and  Workingmeu's  Mutual  Sav.  Bank  and  Build'g  Ass'n  of 

New  Haven  v.  The  Meriden  Agency  Co.,  24  Conn.  159...  106,  133,  251, 

312,  313,  314,  317,  392 
Mechanics'  and  Workingmen's  Mutual  Sav.  Bank  and  Build'g  Ass'n,  &c., 

v.  Wilcox,  24  Conn.  147 106, 133,  134,  161,  312,  313,  314,  347,  392 

Melville  v.  American  Benefit  Build'g  Aas'n  et  al.,  33  Barb.  (N.  Y.)  103...  68, 

339,  349,  524,  526 


TABLE  OF   CASES  CITED.  xliii 

Menier  v.  Hooper^  Tclegr.  Works,  L.  R.  9  Ch.  350 158 

Merchants'  Bank  v.  Cook,  4  Pick.  (Mass.)  405. 447 

Merchants'  Bank  v.  State  Bank,  10  Wall.  604 259 

Merrick  v.  Burlington  and  Warren  Plank  Koad  Co.,  11  la.  74 255 

Merrill  v.  Mclntire,  13  Gray  (Mass.)  157 39,  336,  379,  422,  524,  526 

Mickles  v.  Rochester  Bank,  11  Paige  (N.  Y.)  118 488 

Middlediteh  v.  Ellis,  17  L.  J.,'Ex.  365;  8.  C.,  2  Exch.  623 427 

Middletown  Savings  Bank  v.  Jarvis  et  al.,  33  Conn.  372 447 

Miller  v.  Jacobs,  3  Watts  (Pa.)  477;  S.  C.,  5  Id.  208 474 

Miller  v.  Jeflerson  Build'g  Ass'n,  50  Pa.  St.  32 84,  153, 

171,  172,  202,  291 

Miller's  Estate,  2  Pearson  (Pa.)  248 86,  252,  301,  306, 

309,  478,  484,  513,  519 
Milieu  v.  Davey,  32  L.  J.,  Ch.  122;  S.  C.,  31  Beav.  470;  9  Jur.,  N.  S.,  92; 

7  L.  T.  Rep.,  N.  S.,  551 ;  11  W.  R.  176 431 

Millville  Mut.  Marine  and  Fire  Ins.  Co.  ».  Mechanics'  and  Workingmen's 

Build'g  and  Loan  Ass'n,  14  Vt.  652 64,  259 

Mills  et  al.  v.  Salisbury  Build'g  and  Loan  Ass'n,  75  N.  C.  292 77,  133,  161, 

251,  281,  342,  357,  368,  380 

Miner  v.  Graham,  12  Har.  (Pa.)  491 315 

Miners'  Trust  Co.  Bank  v.  Roseberry,  81  Pa.  St.  309 358,  360* 

Money  penny  v.  Hartland,  1  Car.  &  P.  353 ;  Id.  378 ;  11  Engl.  C.  L.  Rep. 

414;  12  Id.  180 23£ 

Monumental  Build'g  Ass'n,  No.  2,  of  Balto.  City  v.  Herman  et  al.,  33  Md. 

128 35,  129- 

Monumental  Perm't  Build'g  and  Land  Soc/y  of  Balto.  v.  Lewin,  38  Md. 

445 35,405 

Moore  v.  Harrisburg  Bank,  8  Watts  (Pa.)  138 428 

Moore  v.  Rawlins,  6  C.  B.,  N.  S.,  289 147 

Morris  v.  Floyd,  5  Barb.  137 359 

Morris  v.  Harvey,  4  Ala.  300 311 

Morrison  et  al.,  Rec'rs  Chesapeake  Mutual  Land  and  Build'g  Ass'n  v.  Dor- 

sey,  48  Md.  461 35,  140,  141,  289,  349,  439,  440,  450,  514,  522 

Morrison  v.  Glover,  19  L.  J.,  Ex.  20;  4  Exch.  430 158 

Mosley  v.  Baker,  6  Hare  87  ;  S.  C.,  27  Engl.  Law  &  Eq.  512 ;  12  Jur.  551 ; 

17  L.  J.,  Ch.  257 ;  10  L.  T.  Rep.  461 ;  aff'd  on  app.,  1  Hall  &  T.  301 ; 

13  Jur.  817 ;  18  L.  J.,  Ch.  457 ;  13  L.  T.  Rep.  317 ;  3  DeG.,  M.  & 

G.,  1032 190,  192,  193 

Mount  Holly  Turnpike  Co.  v.  Ferree,  17  N.  J.  Eq.  117 445 

Moye  v.  Sparrow,  22  L.  T.  Rep.,  N.  S.,  154 ;  S.  C.,  18  W.  R.  400 ;  5  W. 

N.  33 295 

Muir  v.  Newark  Sav.  Institution  et  al.,  1  C.  E.  Gr.  (N.  J.)  537 363 

Mullock  v.  Jenkins,  14  Beav.  628;  21  L.  J.,  Ch.  65 305 

Mulloy  v.  Fifth  Ward  Build'g  Ass'n,  2  McArth.  (Supr.  Ct,  D.  C.)  594 144, 

338,  379,  380,  400, 


TABLE  OF  CASES  CITED. 

Muth  t.  Dolfield,  43  Md.  466 85,  264,  297 

Mutual  Build'g  and  Loan  Asw'n  r.  Hammell  et  al.,  14  Vr.  (N.  J.)  78...  .64,  144, 

219,  235,  236 
Mutual  Life  Ins.  Co.  t.  Wiloox,  7  N.  Y.  W.  Dig.  13 290,  310,  376 

N. 

Narragansett  Bank  v.  Atlantic  Silk  Co.,  3  Mete.  (Mass.)  282. 520 

National  Bank  v.  Matthews,  98  U.  S.  (8  Otto)  627 290,  310 

National  Build'g  Ass'n  v.  Hottenstein,  10  Pittsb.  Leg.  Journ.,  N.  S.,  225...  87, 

210,  274 
National  Loan  and  Homestead  Ass'n  v.  Hubley,  34  Leg.  Int.  6 ;  24  L. 

J.  50 86,  177 

National  Perm't  Benefit  Build'g  Soc*y,  In  re,  Ex  parte  Williamson,  L.  E., 

15  Ch.  309;  18  W.  R.  388;  22  L.  T.,  N.  S.,  284 ,.  294 

National  Sav.  Loan  and  Build'g  Ass'n,  In  re,  Assigned  Estate  of,  9  W.  N. 

C.  (Pa.)  79 85,  174,  180,  329,  487,  489,  491,  493,  523 

Neflfs  App.,  9  Watts  &  Serg.  (Pa.)  36 465,  471 

Nelson  v.  Blakey,  54  Ind.  29 23 

Nesmith  v.  Washington  Bank,  6  Pick.  (Mass.)  324. 447 

Neville  v.  Wilkinson,  1  Bro.  C.  C.  543;  3  P.  Wms.  74. 267 

Newlin  «.  The  Milton  Build'g  and  Loan  Ass'n,  No.  2,  9  W.  N.  C.  (Pa.) 

220 85,275 

New  York  R.  Co.  v.  Ketchum,  27  Conn.  170 246 

New  York  R.  R.  Co.  v.  Schuyler,  34  N.  Y.  30 256 

Nisbett  v.  Walker,  4  Ga.  221 359 

Norris  v.  Staps,  Hob.  211 272 

North  American  Build'g  Ass'n  v.  Sutton,  35  Pa.  St.  463 84,  133,  136,  147, 

161,  185,  208,  277,  385,  430,  431,  446,  451,  453,  454,  466,  469 

North  River  Bank  v.  Ayinar,  3  Hill  262 267 

North  Whitehall,  &c.,  v.  South'  Whitehall,  &c.,  3  S.  &  R.  (Pa.)  117 256 

Northumberland  County  Bank  ».  Eyer,  60  Pa.  St.  436 273 

.Norwich  and  Norfolk  Provident  Build'g  Sotfy,  In  re,  Smith's  Case,  L.  R.,  1 

Ch.  Div.  481;  45  L.  J.,  Ch.  Div.  143;  24  W.  R.  103 202,  284 

Norwich  and  Norfolk  Provident  Build'g  Soc'y,  In  re,  Ex  parte  Rackham, 

45  L.  J.,  Ch.  Div.  785 491 

Nusbaum  v.  Stein,  12  Md~  315 487 

O. 

Oak  Cottage  Build'g  Ass'n  v.  Eastman  &  Rodgera,  31  lb.a.  556 35,  201, 

378,  382,  397 

Ocmulgee  Build'g  and  Loan  Ass'n  v,  Thomson,  52  Ga.  427 2,  107, 110,  144, 

146,  185, 190,  208,  382,  385,  400,  401,  409,  412 

O'Connor  v.  Warner,  4  Watts  &  Serg.  (Pa.)  227 127 

Odd  FelloW  Build'g  Ass'n  v.  Hogan,  28  Ark.  261 107,  270,  272,  273.  350 


TABLE  OF   CASES   CITED.  X*V 

Orangeville  Mutual  Sav.  Fund  and  Loan  Ass'n  v.  Young,  9  W.  N.  C.  (Pa.) 

251 85,164,281,398 

O'Reilly  i>.  Fetherston  et  al.,  4  Bligh,  N.  S.,  161 ;  8.  C.,  2  Dow.  &  Cl.  39....  431 
O'Rourke  v.  West  Penn  Loan  and  Build'g  Ass'n,  12  Norris  (93  Pa.  St.) 

808;  8  W.  N.  C.  (Pa.)  176 85,  174,  180,  276,  494,  495 

Oroville  and  Virginia  R.  R.  Co.  v.  Plumas  County,  37  Cal.  354 516 

Osborne,  Ex  parte,  In  re  Goldsmith,  L.  R.,  10  Ch.  App.  41  368,  371 

Overby  and  Wife  v.   Fayetteville  Build'g  and   Loan  Ass'n,   81   N.  C. 

56 77,  185,  190,  208,  342,  380,  450 

Owen  v.  Haman,  4  H.  L.  C.  997 487 

P. 

P.,  Ft.  W.  &  C.  R.  R.  Co.  v.  Shaefler,  59  Pa.  St.  350 235 

Pabst  v.  Economical  Build'g  Ass'n,  1  McArth.  (D.  C.)  385 338,  379,  380 

Paffert  v.  Robert  Blum  Build'g  and  Loan  Ass'n,  No.  2,  8  Pittsb.  Leg. 

Journ.  40  87,149 

Palethorp  v.  Furnace,  2  Esp.  511 258 

Palmer  v.  Lawrence,  3  Sand.  S.  C.  R.  161 513 

Parker  v.  Butcher,  36  L.  J.,  Ch.  552;  Law  Rep.,  3  Eq.  762 144,  210, 

401,  411,  413 
Parker  v.  The  Fulton  Loan  and  Build'g  Ass'n,  42  Ga.  451;  46  Id. 

166 107,  161,  185,  280,340,  341,  355,  356,  357,  379 

Paterson  v.  Arnold,  45  Pa.  St.  410 513,  520 

Patten  v.  Wilson,  10  Casey  (34  Pa.  St.)  299 444 

Patterson  v.  Robinson,  1  Casey  (Pa.)  82 315 

Pattison  v.  The  Albany  Build'g  and  Loan  Ass'n,  63  Ga.  373 107,  149,  185, 

188,  207,  341,  350,  356,  362,  485,  513,  514 

Patty  v.  Pease,  8  Paige  277 476 

Pearce  v.  M.  &  I.  R.  Co.,  21  How.  441 260 

Peabody  Build'g  and  Loan  Ass'n  v.  Houseman,  89  Pa.  St.  261 261,  266 

Pearson  v.  Morgan,  2  Bro.  C.  C.  388 267 

Penobscot  Boom  Corporat'n  v.  Lamson,  16  Me.  224 273 

People  v.  Elrnore,  36  Cal.  653 443 

Peoples  Tiernan,  30  Barb.  (N.  Y.)  193 247 

People  v.  The  Troy  House  Co.,  44  Barb.  (N.  Y.)  625 484 

People's  Build'g  and  Loan  Ass'n  of  Camden  v.  Wroth  et  al.,  14  Vr.  70.. .64,  144, 

219,  222,  235,  236,  400 

People's  Sav.  Bank  and  Build'g  Ass'n  v.  Collins,  27  Conn.  145 106,  350,  359, 

379,  473,  514,  5:11 

Percy  v.  Millandon  et  al.,  3  La.  568 228 

Peter's  Build'g  Ass'n,  No.  5,  of  Balto.  City  v.  Jaecksch,  51  Md.  198 35,  503, 

507,509 

Peto  v.  Hammond,  8  Jur.,  N.  S.,  550;  31  L.  J.,  Ch.  354;  30  Beav.  495 155, 

306,489 
Petrie  v.  Wright,  6  S.  &  M.  (14  Miss.)  647 255 


Xlvi  TABLE  OF  CASES  CITED. 

Pfuff  v.  Build'g  Ass'n,  6  W.  N.  C.  (Pa.)  349 86,  20o,  !»(, 

Philadelphia  Mercantile  Loan  Ass'n  v.  Moore,  49  Px  St.  233 84,  4G1,  462 

Philanthropic  Build'g  Ass'n  v.  McKnight,  35  Pa.  St.  470.. .84, 345,  S55,  357,451 

Philipps  v.  Wiekham,  1  Paige  (N.  Y.)  595 519 

Philips  v.  Foxall,  27  L.  T.  Rep.,  N.  S.,  231 ;  Law  Rep.,  7  Q.  B.  666 ;  41 

L.  J.,  Q.  B.  293;  20  W.  R.  900 235 

Philippeburg  Mut.  Loan  and  Build'g  Ass'n  v.  Hawk,  12  C.  E.  Gr.  355 63 

464,466 

Phenix  Bank  of  New  York  v.  Curtis,  14  Conn.  437 273 

Pinnellr.  Boyd,  6  Stewart  (N.  Y.)  190 359,360 

Planet  Benefit  Build'g  and  Investment  Sotfy,  In  re,  L.  R.,  14  Eq.  441 ;  41 

L.  J.,  Ch.  738;  20  W.  R.  935;  27  L.  T.,  N.  S.,  638 493 

Pondville  Co.  v.  Clarke  JL  Conn.  97 489 

Poock  et  al.,  v.  The  Lafayette  Build'g  Ass'n,  71  Ind.  357... 23,  25,  290,  311,  312 

Post  v.  Bank  of  Utica,  7  Hill  (N.  Y.)  391 359 

Powell  t.  Abbott,  9  W.  N.  C.  (Pa.)  231 525 

Power  v.  Hoey,  19  W.  R.  916.  255 

Pratt  v.  Hutchinson,  15  East  oil    4,5 

Premium  Fund  Ass'n's  App.,  3  Wright  (39  Pa.  St.)  156 84,  126,  345,  346 

Presbyterian  Church  v.  Carlisle  Bank,  5  Barr.  (Pa.)  345 445 

President  and  Visitors  of  the  Maryland  Hospital  v.  Foreman,  29  Md.  524...  251 

President,  &c.  v.  Myers,  6  Serg.  &  Rawle  (Pa.)  12 253 

President  of  the  U.  S.  Bank.?'.  Harkins,  1  Johns.  Cas.  132  272 

Price  ».  Moulton,  20  L.  J.,  C.  P.  102  ;  15  Jur.  228 ;  10  C.  B.  (70  Engl.  C. 

L.  Rep.)  561 427 

Price  v.  Taylor,  29  L.  J.,  Ex.  331 ;  6  Jur.,  N.  S.,  402 ;  2  L.  T.  Rep.,  N.  S., 

221;  5H.  &N.  540 264 

Priestley  v.  Hopwood,  12  W.  R.  1031 ;  10  L.  T.,  N.  S.,  646 153,  225 

Professional,  Commercial  and  Industrial  Benefit  Build'g  Sot'y,  In  re,  L.  R., 
6  Ch.  856;  25  L.  T.,  N.  S.,  397;  19  W.  R.  1153 295,  494 

Q 

Quaker-town  Build'g  and  Loan  Ass'n  v.  Server  et  al.,  33  Leg.  Int.  (Pa.) 

359 476 

Queen's  Benefit  Build'g  Soc'y,  In  re,  4  L.  J.,  Ch.  381 ;  24  L.  T.,  N.  S.,  346 ; 

19  W.  R.  597,  762;  L.  R.,  6  Ch.,  815 493 

Queen  City  Perpetual  Build'g  Ass'n  of  Cumberland  v.  Price,  Trustee,  53 
Md.  397 35,  432,  433 

Quigley  v.  Deliaas,  82  Pa.  St.  267 263 

Quiner  v.  Marblehead  Social  Ins.  Co.,  10  Mass.  476 447 

B. 

R.  v.  Aldham  and  United  Parishes  Insurance  Soc'y,  21  L.  J.,  Q.  B.  1 ;  16 
J  P.  149;  15  Jar.  1035;  18  L.  T.  Rep.  74 218 


TABLE   OF   CASES  CITED. 

R.  r.  Bank  of  England,  Doug.  524 446 

R.  v.  Bannatyne,  20  L.  J.,  Q.  B.,  210;  2  L.,  M.  &  P.  213 213 

R.  v.  Batty,  2  Moo.  C.  C.  257 242 

R.  v.  Bowers,  35  L.  J.,  M.  C.  207 ;  S.  C.,  14  L.  T.  Rep.,  N.  S.,  671 ;  Law 

Rep.,  1  C.  C.,  41 ;  12  Jur.,  N.  S,,  671 ;  14  W.  R.  803 ;  30  J.  P.  452 ...  242 
R.  v.  Bren,  9  L.  T.  Rep.,  N.  S.,  452 ;  S.  C.,  27  J.  P.  804 ;  9  Cox,  C.  C.  398  ; 

33  L.  J.,  M.  C.  59 ;  3  N.  R.  176 ;  12  W.  R.  107 ;  1  L.  &  C.,  C.  C.  346.. .240, 243 
R.  v.  Burgess,  32  L.  J.,  M.  C.  185 ;  S.  C.,  9  Jur.,  N.  S.,  582 ;  8  L.  T.  Rep., 

N.  S.,  255 ;  11  W.  R.  602 ;  1  L.  &  C.,  C.  C.  299 ;  9  Cox,  C.  C.  302 ;  27 

J.  P.  388 241 

R.  v.  Cain,  1  Car.  &  Mar.  (41  Engl.  C.  L.  Rep.)  309 238 

R.  v.  D-Eyncourt,  4  Best  &  S.  (116  Engl.  C.  L.  Rep.)  820;  28  J.  P.  116 ; 

9  L.  T.  Rep.,  N.  S.,  712 ;  12  W.  R.  408....  147,  206,  221,  290,  301,  306;  513 
R.  v.  Essex,  30  L.  T.  Rep.,  171 ;  S.  C.,  4  Jur.,  N.  S.,  15 ;  7  Cox,  C.  C.  384 ; 

1  Dears.  &  B.,  C.  C.  R.  369;  21  J.  P.  789 239 

R.  v.  Goodbody,  8  Car.  &  P.  665;  34  Engl.  C.  L.  Rep.  575 243 

R.  e.  Hall,  1  Moo.  C.C.474 241 

R  i'.  Hastie,  32  L.  J.,  M.  C.  63 ;  S.  C.,  7  L.  T.  Rep.,  N.  S.,  695 ;  9  Jur., 

N.  S.,  235 ;  11  W.  R.  293 ;  1  L.  &  C.,  C.  C.  269 ;  9  Cox,  C.  C.  264 ;  27 

J.  P.  85 239 

R.  v.  Lorse,  29  L.  J.,  M.  C.  132;  S.  C.,  8  W.  R.  422 ;  6  Jur.,  N.  S.,  513; 

8  Cox,  C.  C.  302;  Bell,  C.  C.  259 ;  24  J.  P.  341 238 

R.  v.  Marks,  10  Cox,  C.  C.  367 239 

R.  v.  May,  30  L.  J.,  M.  C.  81 ;  S.  C.,  7  Jur.,  N.  S.,  147 ;  3  L.  T.  Rep.,  N. 

S.,  680;  8  Cox,  C.  C.  421 ;  1  L.  &  C.,  C.  C.  13 243 

R.  v.  McDonald,  5  L.  T.  Rep.,  N.  S.,  330;  S.  C.,  31  L.  J.,  M.  C.  67 ;  7  Jur., 

N.  S.,  1127 ;  9  Cox,  C.  C.  10;  10  W.  R.  21 ;  1  L.  &  C.,  C.  C.  85 243 

R.  v.  Miller,  2  M.,  C.  C.  R.  247 240 

R.  v.  Monday,  Cowper  538 222 

R.  v.  Murphy,  4  Cox,  C.  C.  101 241 

R.V.Patrick,  1  Leach  253 239 

R.  i'.  Prince,  1  Moo.  &  M.  21 240 

R.  v.  Proud,  31  L.  J.,  M.  C.,  71 ;  S.  C.,  5  L.  T.  Rep.,  N.  S.,  331 ;  9  Cox,  C. 

C.  22;  10W.  R.  62;  1  L.  &  C.,  C.  C.  97  ;  25  J.  P.  245 243 

R  v.  Redford,  21  L.  T.  Rep.,  N.  S.,  508;  S.  C.,  11  Cox,C.  C.  367 242 

R.  v.  Registrar  of  Friendly  Societies,  16  J.  P.  613 ;  19  L.  T.  Rep.  182 212 

R.  v.  Richardson,  1  Burr.  539 ; 237 

R.  v.  Shoitridge,  1  New  Sess.  Cas.  56,  1  D.  &'L.  855 310 

R.  v.  Spencer,  Russ.  &  Ry.  299 240 

'R.  v.  Thorley,  1  Moo.  C.  C.  343 240 

R.  ».  Tite,  30  L.  J.,  M.  C.,  142;  S.  C.,  4  L.  T.  Rep.,  N.  S.,  259;  7  Jur., 

N.  S.,  556;  8  Cox,  C.  C.  458;  1  L.  &  C.,  C.  C.  29;  9  W.  R.  554;  25 

J.  P.  613 242 

R.  v.  Tongue,  3  L.  T.  Rep.,  N.  S.,  415;  S.  C.,  8  Cox,  C.  C.  386;  30  L.  J., 

M.  C.,  49;  24  J.  P.  723;  Bell  C.  C.  289 24'< 


xlviii  TABLE  OF  CASES  CITED. 

R  «.  Turner,  11  Cox,C.  C.  551 243 

R  v.  Tyree,  38  L.  J.,  M.  C.,  58;  8.  C.,  19  L.  T.  Rep.,  N.  8.,  657;  Law 

Rep.,  1  C.  C.  R  177  ;  17  W.  R  334 ;  33  J.  P.  134 241 

R  v.  Wade,  4  Jur.,  N.  S.,  68  ;  8  E.  &  B.  384 265 

R.  ».  Waite,  2  Cox,  C.  C.  245 240 

R  «.  Walker,  27  L.  J.,  M.  C.,  207 ;  1  Dears.  &  B.,  C.  C.  B.,  600 243 

Railway  Co.  v.  Allerton,  18  Wall.  (U.  S.)  233 222 

Railway  Co.  v.  Filler,  60  Pa.  St.  132 488 

Ramsey's  App.,  2  Watts.  (Pa.)  228 465,  471 

Reading  v.  Weston,  7  Conn.  409 359 

Rct-j-procity  Bank,  In  re.,  29  Barb.  (N.  Y.)  369 125 

Red  Bank  Ass'n  v.  Patterson,  12  C.  E.  Gr.  (N.  J.)  223 63,  369,  379,  464,  466 

Redwine  r.  The  Gate  City  Loan  and  Build'g  Ass'n,  54  Ga.  474 107,  123,  280 

Reeve  v.  Palmer,  27  L.  J.,  C.  P.,  327 ;  4  Jur.,  N.  S.,  929 ;  5  C.  B.,  N.  S., 

(94  Engl.  C.  L.  Rep.)  84;  S.  C.  at  nisiprius,  1  F.  &  F.  48 232 

Reeve  v.  Perkins,  2  J.  &  W.  390 230 

Reeves  r.  White,  16  J.  P.  115;  S.  C.,  21  L.  J.,  Q.  B.  169;  16  Jur.  637; 

7  Q.  B.  995 434 

Regents  of  the  University  of  Md.  v.  Williams,  9  Gill  &  Johns.  (Md.) 

365 481,513 

Reilly  i>.  Mayer,  1  Beas.  (N.  J.)  55 63,  466,  475,  476 

Reiser  v.  William  Tell  Build'g  Ass'n,  39  Pa.  St.  137. 84,  126,  345 

Relief  Sav.  Fund  Ass'n  v.  Longshore  et  al.,  8  Luz.  Leg.  Reg.  (Pa.)  199. ...  87,  165, 

311,  377,  379,  383,  402,  415 

Remington  v.  King,  11  Abb.  Pr.  278 68,  154 

Reynall  v.  Lewis,  and  Wyld  v.  Hopkins,  16  L.  J.,  Ex.,  25 ;  S.  C.,  15  M.  & 

W.  517. 118 

Reynolds  v.  Tooker,  18  Wend.  (N.  Y.)  591 474 

Rheen  v.  Naugatuck  Wheel  Co.,  33  Pa.  St.  358 273 

Rhoads  v.  Hoernerstown  Build'g  Ass'n,  82  Pa.  St.  180 83,  84,  171,  301,  306, 

346,  349,  403,  484,  514,  515,  517,  518 
Richards  v.  The  Bibb  County  Loan  Ass'n,  24  Ga.  198...  107,  190,  208,  340,  382 

Richards  v.  Davis,  Am.  Law  Reg.,  June,  1859,  p.  483 447 

Richards  v.  Richards,  2  B.  &  Ad.  447  ;  22  Engl.  C.  L.  Rep.  119 130,  441 

Richardson  v.  The  St.  Joseph's  Iron  Co.,  5  Blackf.  (Ind.)  146 272 

Richardson  v.  Williamson,  Law.  Rep.,  6  Q.  B.  276;  40  L.  J.,  Q.  B., 

145 220,287 

Riley  v.  Packington,  16  L.  T.  Rep.,  N.  S.,  382 118 

Risk  v.  Delphoe  Build'g  and  Sav.  Ass'n,  31  Ohio  St.  517 80,  142, 

190,  208,  378,  426 

Roberts  v.  Price,  16  L.  J.,  C.  P.,  169;  11  Jur.  352;  4  C.  B.  1231 237 

Robertson  v.  American  Homestead  Ass'n,  10  Md.  397 34,  142,  189,  190,  191, 

208,  335,  371,  374,  379,  380,  402,  421,  422,  423,  426,  430 

Robinson  v.  Smith,  3  Paige  (N.  Y.)  222 229 

Rodgera  ».  Gibson,  1  Yeates  (Pa.)  Ill 474 


TABIJB  OF  CASES  CITED. 

Rodgers  v.  Southwestern  Mutual  Sav.  Fund  and  Build'g  Ass'n,  7  W.  N.  C. 

(Pa.)  95 85,  171,  282 

Rogers  v.  Huntington  Bank,  13  S.  &  R.  (Pa.)  77. 141 

Rollins  r.  Clay,  33  Me.  (3  Red.)  132 488 

Ross  v.  City  of  Madison,  1  Ind.  98 255 

Russell  v.  Wakefield  Water  Works,  L.  R.,  20  Eq.,  474 158 


S. 

Salina  Build'g,  Sav.  and  Trust  Ass'n  v.  Nelson  et  al.,  22  Kan.  751.... 31,  32,  379 

Samuel  v.  Halladay,  1  Woolw.  (C.  C.)  400 •.  222 

Sands  v.  Church,  2  Seld.  (6  N.  Y.)  347 358,  359 

Sanford  et  al.  v.  Tremlett  et  al.,  42  Mo.  384 254 

Sargent  v.  Carr,  12  Me.  396.  448 

Sargent  v.  Franklin  Ins.  Co.,  8  Pick.  (Mass.)  90 446 

Sargent  v.  Webster,  13  Mete.  (Mass.)  497 222 

Saving  Fund  v.  Murray,  14  Leg.  Int.  (Pa.)  133 87,  451 

Sawyer  v.  Meth.  Ep.  Church,  18  Vt.  405 ±22 

Schaeff'er  v.  Amicable  Perm't  Land  and  Loan  Co.,  47  Md.  126. 35,  270 

Schermerhorn  v.  Amer.  Ins.  and  Trust  Co.,  14  Barb.  147 359 

Schnepf's  App.,  47  Pa.  St.  37 84,  362,  451 

Schober  v.  Accommodation  Sav.  Fund  and  Loan  Ass'n,  35  Pa.  St.  223 84, 

309,  461,  462 

School  Distr.  v.  Blaisdell,  6  N.  H.  197 273 

Scott  v.  Depeyston,  1  Edw.  Ch.  513 ±29 

Scott  v.  Leary,  34  Md.  589 356 

Scott  v.  Scholey,  8  East  476 448 

Scott  v.  Scott,  1  Cox  378 2ti7 

Seagrave  v.  Pope,  15  Engl.  L.  &  Eq.  477 ;  22  L.  J.,  Ch.  258 ;  16  Jur.  1099 ; 

19  L.  T.  Rep.  173;  20  Id.  158;  1  DeG.,  M.  &  G.  783 188,  189,  190, 

195,  333,  335,  348,  370 

Second  Amer.  Build'g  Ass'n  v.  Platt  et  al.,  5  Duer  (N.  Y.)  675 67,  270 

Second  German-Amer.  Build'g  Ass'n  of  Baltimore  City  v.  Newman,  50 

Md.  62 35,  356 

Second  Manhattan  Build'g  Ass'n  v.  Hayes,  4  Abb.  App.  Dec.  183 ;  2  Keyes 

(39  N.  Y.  Rep.)  192  68,  227,  265,  349,  514 

Second  National  Bank  of  Titusville,  Appeal  of,  85  Pa.  St.  528 358,  360 

Second  New  York  Build'g  Ass'n  v.  Gallier,  cited  in  Citizens'  Mutual  Loan, 

&c.,  Ass'n  v.  Webster,  25  Barb.  (N.  Y.)  263 67,  145,  408 

Selden  v.  Reliable  Sav.  and  Build'g  Ass'n,  2  W.  N.  C.  (Pa.)  481 ;  32  P.  F. 

Sm.  336 85,  260,  271,  379,  397,  451,  469 

Selma  Build'g  and  Loan  Ass'n  v.  Morgan,  57  Ala.  33 14,  435 

Sewall  v.  Lancaster  Bank,  17  S.  &  R.  (Pa.)  285 141 

Shack  v.  Anthony,  1  M.  &  S.  573 427 

Shackleford  v.  New  Orleans,  Ac.,  R.  Co.,  37  Miss.  202 24« 

D 


1  TABLE  OF  CASES  CITED. 

Shaffrey  v.  The  Workingmen's  Sav.,  Loan  and  Build'g  Aaa'n,  64  Ind. 

600 23,  347,  379 

Shannon  et  al.,  Trustees,  &c.,  ».  Dunn,  43  N.  H.  194 338,  379,  524 

Shannon  v.  Howard  Mutual  Build'g  Ass'n  of  the  City  of  Baltimore,  36  Md. 

383  35,  144,  145,  190,335,350,368,378, 

379,  400,  401,  402,  405,  408,  412,  413,  416,  430 

Sharpe  t.  Warren,  6  Price  161 266 

Shaw  r.  Arden,  9  Bingh.  290;  23  Engl.  C.  L.  Rep.  278 232 

Shelley  v.  The  Newport  Sav.  Ass'n,  11  Bush  (Ky.)  305 107,  269 

Sherriff  v.  Glenton,  28  L.  T.,  N.  S.,  65 427 

Sherman  Build'g  Ass'n  v.  Rock,  9  Phila.  75 86 

Shewalter  v.  Pirner,  55  Mo.  233 310 

Shinn  v.  The  Commonwealth,  32  Gratt.  (Va.)  899 97,  238 

Shipley  v.  Kymer,  1  M.  &  S.  484 266 

Shipley  r.  Mechanics'  Bank,  10  Johns.  (N.  Y.)  484 445 

Shuttle's  App.,  2  Pa.  St.  304. 465,471 

Shufelt  v.  Shufelt,  9  Paige  (N.  Y.)  137 359 

Silver  v.  Barnes,  6  Bingh.,  N.  C.  800 ;  8  Scott  300 ;  37  Engl.  C.  L.  Rep. 

335 327,  332,  335,  337,  341,  343,  346,  348 

Skinner's  Estate,  4  Phila.  189 86 

Slawson  v.  Loring,  5  Allen  340 264 

Slaymaker  t.  Gettysburg  Bank,  10  Barr.  (Pa.)  373 442 

Slee  v.  Bloom,  19  Johns.  456...  519 

Smiths.  Crocker,  5  Mass.  538 442 

Smith  v.  Pilkington,  4  Jur.,  N.  S.,  58 ;  30  L.  T.  Rep.  196 ;  22  J.  P.  5 ; 

S.  C.,  on  appeal,  1  DeG.,  F.  &  J.  120 ;  29  L.  J.,  Ch.  227 ;  24  J.  P.  227...  119, 

190,  198,  430 

Smith  v.  Prattville  Manuf'g  Co.,  29  Ala.  503 228 

Smith  t?.  Wolf  et  al.,  55  Iowa  555 362 

Smith  et  al.  r.  Virgin  et  al.,  33  Me.  148 482 

Smith  and  Wife  v.  Mechanics'  Build'g  and  Loan  Ass'n,  73  N.  C.  372... 77, 187, 

342,  380,  416 

Snider's  Estate,  34  Leg.  Int.  (Pa.)  49 86,  132,  206 

Somerset  County  Build'g,  Loan  and  Sav.  Ass'n  v.  Canraan  &  Vandervere, 

3  Stockt.  (N.  J.)  282. 63,  190,  208,  370,  379,  426,  452 

South  Bay  Meadow  Dam  Co.  v.  Gray,  30  Me.  547 520 

Sparrow  v.  Farmer,  26  Beav.  511 ;  5  Jur.,  N.  S.,  530;  28  L.  J.,  Cn.  537  ; 

33  L."T.  216;  23  J.  P.  500 142,  190,  199 

Spering's  App.,  71  Pa.  St  11 227,  228,  229 

Spinning  v.  Home  Build'g  and  Sav.  Ass'n  of  Dayton,  Ohio,  et  al.,  26  Ohio 

St.  483 80,  514,  518,  520 

Spring  Garden  Ass'n  v.  Tradesmen's  Loan  Ass'n,  46  Pa.  St.  493....  84,  451,  453, 

454,  462,  466,  468 

Spring  Valley  Water  Works  v.  San  Francisco,  22  Cal.  434 514 

Springville  Sav.  Fund  and  Loan  Ass'n  v.  Raber's  Adm'r  and  terre-tenant, 

33  Leg.  Int.  (Pa.)  329 ;  S.  C.,  24  Pittsb.  L.  J.  23 86,  451,  454,  469 


TABLE  OF  CASES  CITED.  K 

Ftate  Board  of  Agriculture  t.  The  Citizens'  Street  Kailway  Co.,  47  Ind. 

407 290 

State  v.  Carrol],  38  Conn.  471 247 

State  v.  Greenville  Build'g  Ass'n,  29  Ohio  St.  92 80,  164,  251, 

281,  320,  321,  395,  484 

State  v*Oberlin  Build'g  and  Loan  Ass'n,  35  Ohio  St.  258. ..80,  164,  251,  281, 

296,  309,  311,  320,  321,  365,  395,  484 
State,  Galbraith,  pros.,  v.  People's  Build'g  and  Loan  Ass'n  of  Caraden,  14 

Vr.  (N.  J.)  389 64,  277,  445 

State,  Hill,  pros.,  v.  Hansom,  7  Vr.  (N.  J.)  50. 437 

State,  Washington  Build'g  Ass'n,  pros.,  v.  Creveling,  10  Vr.  (39  N.  J.  L. 

K.)  465;  S.  C.,  aff'd,  11  Vr.  (40  N.  J.  L.  R.)  192 64,  437,  477 

State,  Washington  Build'g  Ass'n,  pros.,  v.  Hornbacker,  12  Vr.  519,  13  Vr. 

635 64,  325,  338,  386,  436,  437,  452,  477 

State,  Wickoff,  pros.,  v.  Jones,  10  Vr.  650 437 

State  v.  State  Bank  of  Maryland,  6  Gill  &  J.  (Md.)  205 488 

State  Sav.  Ass'n  v.  Kellogg  et  al.,  63  Mo.  540 58,  154 

Steamship  Dock  Co.  v.  Heron,  52  Pa.  St.  280 141 

Stedmanv.  Eveleth,  6  Mete.  (Mass.)  114 513 

Stein  and  Wife  v.  Indianapolis  Build'g  Loan  Fund  and  Sav.  Ass'n,  18  Ind. 

237 23,127,272,359,526 

Stephens  v.  Stephens,  1  Ashm.  (Pa.)  190 444 

Stetsons  Kempton,  13  Mass.  282 283 

Stevens  v.  Hurlbut  Bank,  31  Conn.  146 447 

Stevens  v,  Muir,  8  Ind.  352 359 

Stiles's  App.,  9  W.  N.  C.  (Pa.)  83 85,  164,  252,  281, 

297,  311,  394,  395,  396,  484 
St.  Joseph  and  Kansas  Loan  and  Build'g  Ass'n  v.  Thompson  et  al.,  19  Kan. 

321 31,  312,  313 

St.  Luke's  Church  v.  Mathews,  4  Des.  Ch.  (S.  C.)  578 244 

Stockett  v.  Ellicott,  3  Gill  &  Johns.  (Md.)  123 354 

Stoddert  v.  Vestry  of  Port  Tobacco  Parish,  2  Gill  &  J.  227 258 

Stow  v.  Wise,  7  Conn.  214 520 

Stratton  v.  Allen,  1  Green  229 226 

Sturgis  v.  Drew  et  al.,  5  N.  Y.  W.  Dig.  95 278 

Stuyvesant  v.  Hone,  1  Sandford  (N.  Y.)  419. 476 

Sunbury  Mutual  Sav.  Fund  and  Build'g  Ass'n  ».  Martin,  1  Luz.  Leg.  Reg. 

(Pa.)  147 86 

Suttonv.  Cole,  3  Pick.  (Mass.)  232 273 

Swift  v.  Allegheny  Build'g  and  Loan  Ass'n,  82  Pa.  St.  142. 84,  270 

T. 

Tallmadge  v.  The  Fiahkill  Iron  Co.,  4  Barb.  382. 154 

Tanner's  App.,  11  Pittsb.  Leg.  Journ.  301 87,  311,  315,  415 

Taylor  v.  Bank  of  Kentucky,  2  J.  J.  Marsh.  564. 235 


lii  TABLE  OF  CASES  CITED. 

Taylor's  Exr  t  v.  Maria,  5  Rawle  (Pa.)  51 47ft 

Thatcher  v.  Gammon,  12  Mass.  268 - 361 

Thistle  Friendly  Soc'y  of  Aberdeen  t>.  Garden,  12  Shaw  &  Dunlop's  Rep. 

745 235 

Thorn  t>.  Doub,  8  Gill  (Md.)  1 359 

Thomas  ».  Shoemaker,  6  Watts  &  Serg.  (Pa.)  183 355 

Thompson  v.  Berry,  3  Johns.  Ch.  (N.  Y.)  395 361 

Thompson  v.  Hudson,  Law  Rep.,  2  Ch.  App.  255 401 

Thompson  t>.  Planet  Benefit  Build'g  Soc'y,  L.  R.,  15  Eq.  333 ;  42  L.  J.,  Ch. 

364;  21  W.  R.  474;  28  L.  T.,  N.  S.,  549 231 

Thompson  r.  Stephens,  10  Me.  27...  ..' 448 

Thomson  v.  Ocmulgee  Build'g  and  Loan  Ass'n,  56  Ga.  350 107, 

479,  482,  506 
Thorn  v.  Croft,  36  L.  J.,  Ch.  68 ;  S.  C.,  31  J.  P.  356 ;  L.  R.,  3  Eq.  193 ;  15 

L.  T.  Rep.,  N.  S.,  205;  15  W.  R.  54 435 

Thorndike  v.  Stone,  11  Pick.  (Mass.)  183 337 

Three  Towns  British  Mutual  Deposit  and  Loan  Society  (Lirn.)  v.  Doyle,  7 

L.  T.  Rep.,  N.  S.,  276 ;  S.  C.,  11  W.  R.  22 ;  13  C.  B.,  N.  S.  (106  Engi. 

C.  L.  Rep.),  290 406 

Tierney,  In  re,  9  Ir.  Rep.,  Eq.  1 ;  8  IT.  Law  T.  Rep.  29 145,  405 

Tobacco-Pipe  Makers  v.  Woodrofle,  7  B.  &  C.  838 ;  5  D.  &  R.  530 ;  14 

Engl.  C.  L.  Rep.  129 148 

Tomkine  v.  Barnett,  1  Salk.  22 354 

Tradesmen's  Build'g,  &c.,  Ass'n  ».  Thompson,  5  Stew.  (N.  J.)  133;  4  Id. 

536 63,  261 

Triefert  v.  Burgess,  11  Md.  452 487 

Triton  Ins.  Co.  v.  McGarian,  4  Denio  392 513 

Trott  v.  Hughes,  16  L.  T.  Rep.  260 230 

Trunibo  v.  Blizzard,  6  Gill  &  Johns.  (Md.)  18 354 

Trustees  v.  Reneau,  2  Swan  (Tenn.)  94 269 

Tucker  Mamif!g  Co.  v.  Fairbanks,  98  Mass.  101 263 

Turner  v.  Calvert,  12  Serg.  &  Rawle  (Pa.)  46 289 

Tyson  v.  Rickard,  3  HU1  &  Johns.  (Md.)  109 354 


U. 

Union  Bank  «.  Laird,  2  Wheat  (U.  S.)  390 141 

Union  Build'g  and  Loan  Ass'n  of  New  Brunswick  v.  Masonic  Hall  Ass'n 

of  New  Brunswick,  et  al.,  2  Stew.  (N.  J.)  389 63,  143,  160,  164,  166, 

274,  311,  312,  317,  374,  376,  415 

Union  Hall  Ass'n  t>.  Morrison,  39  Md.  281 432,  433 

Uniontown  Build'g  and  Loan  Ass'n's  App.,  92  Pa,  St.  200 85,  475 

United  States  v.  Bank  of  Columbus,  21  How.  356 259 

United  States  v.  Kirkpatrick,  9  Wheat.  720 235 

United  States  r.  Vanzandt,  11  Wheat.  184 235 


TABLE  OF  CASES  CITED.  liii 

United  States  Build'g  Ass'n  v.  Silver-man,  4  W.  N.  C.  (Pa.)  546 ;  35  Leg. 

Int.  51 ;  4  Norris  (85  Pa.  St.)  394 84,  149,  174,  176,  178, 179,  275 

United  States  Ins.  Co.  v.  Shriver  et  al.,  3  Md.  Ch.  Dec.  381 465 

Utica  Bank  v.  Smalley,  2  Cow.  (N.  Y.)  770 141 

Utica  Ins.  Co.  v.  Bloodgood,  4  Wend.  (N.  Y.)  652 243,  246 

V. 

Vann  and  wife  v.  Fayetteville  Build'g  and  Loan  Ass'n,  75  N.  C.  494 77, 

342,  380 

Vansands  v.  Middlesex  County  Bank,  26  Conn.  144 447 

Vermilye  v.  Adams  Express  Co.,  21  Wall.  (U.  S.)  138 ..  254 

Victoria  Perm't  Benefit  Build'g,  Investment  and  Freehold  Land  Soc'y  of 
Birmingham  and  the  Midland  Counties,  In  re,  Empson's  Case,  22  L.  T., 

N.  S.,  855;  18  W.  R.  565;  L.  R.,  9  Eq.  597 137 

Victoria  Perm't  Benefit  Build'g,  Investment  and  Freehold  Land  Soc'y,  In 
re,  Hill's  Case,  Jones'  Case,  L.  R.,  9  Eq.  605 ;  39  L.  J.,  Ch.  628 ;  18 
W.  R.  967 ;  22  L.  T.,  N.  S.,  777 135,  295 

W. 

Wachtel  v.  The  Noah  Widows'  and  Orphans'  Beneficial  Soc'y,  11  N.  Y. 

W.  Dig.  457 133, 147 

Wakefield  v.  Phelps,  37  N.  H.  295 83 

Walker  v.  British  Guarantee  Ass'n,  16  Jur.  885;  21  L.  J.,  Q.  B.,  257 219 

Walker  v.  Giles,  6  C.  B.  (60  Engl.  C.  L.  Eep.)  662;  13  Jur.  588 :  18  L.  J., 

C.  P.  323;  13  L.  T.  Rep.  209 232,  252,  435,  436 

Waller  v.  Bank  of  Kentucky,  3  J.  J.  Marsh.  201 244 

Walter  v.  Riehl,  38  Md.  211 35 

Wardel  v.  Edwards,  2  Johns.  Cas.  260 444 

Warren  v.  Lynch,  5  Johns.  (N.  Y.)  230 253 

Washington  Build'g  and  Loan  Ass'n  v.  Beaghen  et  al.,  12  C.  E.  Gr.  99 63, 

466,  476 
Waterlow  v.  Sharp,  Gardner  v.  Sharp,  Law  Rep.,  8  Eq.  501 ;  20  L.  T. 

Rep.,  N.S.,  902 296 

Watkins  v.  Workingmen's,  &c.,  Build'g  and  Loan  Ass'n  of  Hyde  Park,  38 

Leg.  Int.  (Pa.)  333;  10  W.  N.  C.  414;  97  Pa.  St.  514 85,  141,  147,  151, 

152,  168,  187,  190,  192,  203,  207,  271,  383,  384,  389, 
430,  451,  453,  454,  455,  457,  458,  479,  484,  498,  505,  511 

Watts'  App.,  78  Pa.  St.  370 22S,  ±20 

Wei«s'  App.,  5  W.  N.  C.  (Pa.)  423 86,  451,  462,  409,  474 

Welch  v.  Seymour,  28  Conn.  387 236 

Welsh  v.  Phillips,  54  Ala.  309 311 

Westerveldt  v.  Radde,  55  How.  Pr.  (N.  Y.)  369 218 

West  Harrisburg  Loan  and  Build'g  Ass'n  v.  Morganthal,  2  Pearson  (Pa.) 

343 .    86 


llV  TABLE  OF  CASES  CITED. 

West  Winsted  Sav.  Bank  and  Build'g  Ass'n  v.  Ford,  27  Conn.  282.....  106,  350, 

379.  513,  514,  52C 

West  Winsted  Sav.  Bank,  Ac.,  v.  Rice,  27  Conn.  293 106,  350, 

379,  513,  514,  520 

Weston  P.  Bear  River,  etc.,  Mining  Co.,  5  Cal.  186 445,  449 

Wetterwulgh  ».  Knickerbocker  Build'g  Ass'n,  2  Bos.  (N.  Y.  Super.  Ct.) 

381 68,  174,  175 

Wheeler  v.  Hughes,  1  Dallas  (Pa.)  23 444 

White  r.  Mechanics'  Build'g  Fund  Ass'n,  22  Grattan  (Va.)  233... .97,  109,  182, 

189,  208,  285,  338,  365,  379,  486 

White  Haven  Ass'n  v.  Kelly,  9  Luz.  Leg.  Reg.  (Pa.)  9 87,  205,  481 

Wide  v.  Jenkins,  4  Paige  (N.  Y.)  481... 488 

Wilcox,  Ex  parte,  7  Cowen  (N.  Y.)  402 216,  222 

Williams  v.  Hayward,  25  L.  J.,  Ch.  289 ;  S.  C.,  1  Jur.,  N.  S.,  1128 ;  26  L. 

T.  Rep.  134;  22  Beav.  220;  19  J.  P.  787 435 

Williams  v.  Storrs,  6  Johns.  Ch.  353 268 

Williar  v,  Baltimore  Butchers'  Loan  and  Annuity  Ass'n  (Williar's  App.), 

45  Md.  546 35,  39,  189,  335,  349,  356,  378,  397,  517 

Willis  v.  Jerrain,  Cro.  Eliz.  167,  Cruise  T.  32,  C.  2,  S.  82. 254 

Wilson  v.  Little,  2  Comst.  (N.  Y.)  443 447 

Wilson  v.  Tucker,  3  Stark.  154 232 

Winchester  Build'g  Ass'n  et  al.  v.  Gilbert,  23  Grattan  (Va.)  787.. .97,  182,  189, 

190,  338,  379,  421,  422,  464,  486 
Windsor  &  Applegarth  v.  Bandel  et  al.,  40  Md.  172;  14  Am.  Law  Rep., 

N.  S.,  250 14,502,  504,  509 

Witherington  v.  Banks,  Sel.  C.  C.  31 431 

Wittman  v.  Build'g  Ass'n,  7  W.  N.  C.  (Pa.)  80 85,  149,  175 

Wolbach  v.  Lehigh  Build'g  Ass'n,  3  Norris  (84  Pa.  St.)  211 84,  311, 

313,  314,  402 

Wood  v.  Robbins,  11  Mass.  504 268 

Wood  v.  United  States,  16  Pet.  (U.  S.)  342 96 

Woodbury  Sav.  Bank  and  Build'g  Ass'n  v.  Charter  Oak  Fire  and  Marine 

Ins.  Co.,  31  Conn.  517 259 

Worcester  Medical  Institution  v.  Harding,  11  Cush.  (Mass.)  285 520 

Workingmen's  Build'g  Ass'n  v.  Coleman,  8  W.  N.  C.  (Pa.)  17 ;  89  Pa,  St. 

428 85,  349,  485,  513,  518,  519 

Y. 

Yates  v.  Aston,  4  Q.  B.  182;  8.  O,  3  G.  &  D.  361;  12  L.  J,  N.  S.,  Q.  B. 
160;  7  Jur.  83 427 

Z. 

Zabriskie  v.  Cleveland,  &<x,  R.  Co.,  23  How.  381 260 

Zion  Church  v.  St.  Peter's  Church,  5  Watts  &  Serg.  (Pa.)  215- 278 


TABLE  OF  DEFENDANTS 

In  Cases  in  which  Building  Associations  are  Plaintiffs. 


B. 

Beaghen  et  al.,  Washington  Build'g  and  Loan  Ass'n  v. 

Bebout's  Adm'ra  et  al.,  Licking  County  Sav.  and  Build'g  Ass'n  v. 

Benjamin  &  Benjamin,  appellants,  Lincoln  Build'g  and  Sav.  Ass'n,  appellee,  v 

Benson  et  al.,  Build'g  Ass'n  v. 

Blackburn  et  al.,  Hawkeye  Benefit  and  Loan  Ass'n  t>. 

Bellinger,  Columbia  Build'g  and  Loan  Ass'n  v. 

Bolster,  Bismark  Build'g  and  Loan  Ass'n  v. 

Brace  et  al.,  Frostburg  Mutual  Build'g  Ass'n  v. 

Britten,  Build'g  Ass'n  v. 

C. 

Canman  &  Vandervere,  Somerset  County  Build'g,  Loan  and  Sav.  Ass'n  ». 

Charter  Oak  Fire  and  Marine  Ins.  Co.,  Woodbury  Sav.  Bank  and  Build'g  Ass'n  v. 

Clifford,  Berlin  Build'g  and  Loan  Ass'n  v. 

Coleman,  Workingmen's  Build'g  Ass'n  v. 

Collins,  People's  Sav.  Bank  and  Build'g  Ass'n  v. 

Commonwealth,  Bourgignon  Build'g  Ass'n  v. 

Commonwealth,  Excelsior  Build'g  Ass'n  v. 

Conover,  Manufacturers'  &  Mechanics'  Sav.  and  Loan  Co.  v. 

Conover  el  al.,  Mechanics'  Build'g  and  Loan  Ass'n  of  New  Brunswick  ». 

Creveling,  State,  Washington  Build'g  Ass'n,  prosecutor,  v. 

Crowell,  Chicago  Build'g  Soc"y  v. 

Crumb,  Columbian  Build'g  Ass'n  of  East  Balto.,  No.  4,  v. 

D. 

Dobbins,  Association  v. 

Doyle,  Three  Towns  British  Mutual  Deposit  and  Loan  Sotfy  v. 

E. 

Eastman  &  Rodgers,  Oak  Cottage  Build'g  Ass'n  ». 
Ellsler,  Build'g  Ass'n  t>. 
Eshlebach,  Build'g  Ass'n  v. 
Everham,  Loan  Co.  v. 


Ivi  TABLE  OF  DEFENDANTS. 

F. 

Fatty,  City  Build'g  and  Loan  Ass'n  ». 

Flacli,  Cincinnati  Germ.  Build'g  Ass'n,  No.  3,  v. 

Ford,  West  Winsted  Sav.  Bank  and  Build'g  Ass'n  e. 

GK 

Gallagher  et  al.,  Forest  City  United  Land -and  Build'g  Ass'n  ». 

( Sillier,  Second  New  York  Build'g  Ass'n  t». 

Garden,  Thistle  Friendly  Soc"y  of  Aberdeen  t>. 

« ir.irge,  Build'g  Ass'n  v. 

Gibson,  Ass'n  v. 

Gilbert,  Winchester  Build'g  Ass'n  v. 

Goodrich  et  al.,  City  Loan  and  Build'g  Ass'n  of  Augusta,  et  al.  ». 

Graham,  Lincoln  Build'g  and  Sav.  Ass'n  v. 


Haas  et  al.,  Lincoln  Build'g  and  Sav.  Ass'n  v. 

Hammell  et  al.,  Mutual  Build'g  and  Loan  Ass'n  p. 

JIanlen,  Marietta  Build'g  Ass'n  v. 

Hawk,  Phillipsburg  Mutual  Loan  and  Build'g  Ass'n  v. 

Hayes,  Second  Manhattan  Build'g  Ass'n  v. 

Heider,  Burlington  Mutual  Loan  Ass'n  v. 

Hermann  et  al.,  Monumental  Build'g  Ass'n,  No.  2,  of  Balto.  City  ft. 

Hooker,  Marble  Build'g  Ass'n  v. 

Hogan,  Odd  Fellows'  Build'g  Ass'n  v. 

Hornbacker,  State,  Washington  Build'g  Ass'n,  prosecutor,  v. 

Hottenstein,  Nat'l  Build'g  Ass'n  v. 

Houseman,  Peabody  Build'g  and  Loan  Ass'n  v. 

Hubley,  Nat'l  Loan  and  Homestead  Ass'n  v, 

J. 

Jaecksch,  Peter's  Build'g  Ass'n,  No.  5,  of  Balto.  City  «. 

K. 

Keller,  Delaware  Build'g  Ass'n  v. 
Kellogg,  State  Sav.  Ass'n  v. 
Kelly,  White  Haven  Ass'n  v. 
Kribs,  Ass'n  v. 

I*. 

Lewin,  Monumental  Perm't  Build'g  and  Land  8oc*y  of  Balto.  flk 
Lowdermilk,  Frostburg  Mutual  Bnild'g  Ass'n  v. 
Lyon,  Citizens'  Loan  Ass'n  of  Newark  v. 


TABLE  OF   DEFENDANTS.  Ivii 

M. 

March,  Franklin  Build'g  Ass'n  ». 

Martin,  Hoboken  Build'g  Ass'n  v. 

Martin,  Sunbury  Mutual  Sav.  Fund  and  Build'g  Ass'n  v. 

Masonic  Hall  Ass'n  of  New  Brunswick,  Union  Build'g  and  Loan  Ass'n  of 

New  Brunswick  v. 
Mather,  Franklin  Build'g  Ass'n  v. 
McKnight,  Philanthropic  Build'g  Ass'n  ». 
Meriden  Agency  Co.,  Mechanics'  and  Workingmen's  Mutual  Sav.  Bank  aW 

Build'g  Ass'n  of  New  Haven  v. 
Metzger,  German  Fair  Hill  Build'g  Ass'n  v. 
Mixell,  Juniata  Build'g  and  Loan  Ass'n  v. 
Moore,  Philadelphia  Mercantile  Loan  Ass'n  v. 
Morgan,  Selma  Build'g  and  Loan  Ass'n  v. 
Morganthal,  West  Harrisburg  Loan  and  Build'g  Ass'n  ». 
Morrison,  Union  Hall  Ass'n  v. 
Murray,  Saving  Fund  v. 

N. 

Neill,  Germania  Build'g  Ass'n  v. 
Nelson  et  al.,  Salina  Build'g,  Sav.  and  Trust  Ass'n  v. 
Neurath,  Ass'n  v. 

Newman,  Second  Germ.-Amer.  Build'g  Ass'n  of  Balto.  City  v. 
Nugent  et  al.,  Citizens'  Loan  Ass'n  of  the  City  of  Newark  v. 

O. 

O'Connor,  Build'g  Ass'n  v. 

Odd  Fellows'   Hall  Ass'n,  Manufacturers'   and  Mechanics'  Sav.  and  Loan 
Ass'n  v. 

P. 

Patterson,  Red  Bank  Ass'n  v. 

PfeifFer  &  Schauffele,  Hansbury,  Treas.  Germantown  Build'g  Ass'n,  «. 

Platt,  Second  Amer.  Build'g  Ass'n  v. 

Prioe,  Queen  City  Perpetual  Build'g  Ass'n  of  Cumberland  v. 

B. 

Raber's  Adm'r,  Springville  Sav.  Fund  and  Loan  Ass'n  t». 

Reid,  Build'g  Ass'n  v. 

Reynolds,  Hamilton  Build'g  Ass'n  t. 

Rice  and  wife,  Build'g  Ass'n  v. 

Richards,  Bibb  County  Loan  Ass'n  v. 

Roan,  Kingsessing  Build'g  Ass'n  v. 

Rock,  Sherman  Build'g  Ass'n  v. 

Rowe,  Build'g  Ass'n  t. 

Ruegger,  Chillicote  Sav.  Ass'n  «. 


Iviii  TABLE  OF   DEFENDANTS. 

8. 

Schuller,  Build'g  Ass'n  v. 

Seemiller,  Build'g  Ass'n  v. 

Sendmayer,  German  Union  Build'g  and  Sav.  Fund  Ass'n  v. 

Silvenuon,  United  States  Build'g  Ass'n  v. 

Smith  et  al.,  Maryland  Perm't  Land  and  Build'g  Soc'y  of  Baltimore  *. 

Server  et  al.,  Quakertown  Build'g  and  Loan  Ass'n  v. 

Stark  et  al.,  Frostburg  Build'g  Ass'n  et  al.  v. 

Steele,  Association  v. 

Stephens,  Clark ville  Build'g  and  Loan  Ass'n  v. 

Stevens  et  al.,  Mechanics'  Build'g  Ass'n  v. 

Stonemetz,  Loan  Ass'n  v. 

Sutton,  North  Anier.  Build'g  Ass'n  v. 

T. 

Taylor,  Baltimore  Perm't  Build'g  and  Land  Soc'y  v. 

Thompson  et  al.,  St.  Joseph  and  Kansas  Loan  and  Build'g  Awn  «. 

Thompson,  Tradesmen's  Build'g,  &c.,  Ass'n  v. 

Thomson,  Ocmulgee  Build'g  and  Loan  Ass'n  v. 

Timmins,  Build'g  Ass'n  v. 

Tradesmen's  Loan  Ass'n,  Spring  Garden  Ass'n  v. 

TJ. 
Uhler,  Citizens'  Security  and  Land  Co.  of  Balto.  City  v. 

V. 

Vandervere,  Somerset  County  Build'g,  Loan  and  Sav.  Ass'n  ».  « 

W. 

Wall,  Ass'n  v. 

Weber,  Canton  Nat'l  Build'g  Ass'n  v. 

Webster,  Citizens'  Mut.  Land  and  Accumul'g  Fund  Ass'n  t>. 

Wilcoz,  Mechanics'  and  Workingmen's  Mut.  Sav.  Bank  and  Build'g  Asu'n  w 

Wroth,  People's  Build'g  and  Loan  Ass'n  of  Camden  v. 

Y. 

Young,  Orangeville  Mut  Sav.  Fund  and  Loan  Ass'n  v. 

Z. 
Backer,  Low  Street  Build'g  Ass'n,  No.  6,  v. 


THE  LAW  OF 

BUILDING  ASSOCIATIONS. 


CHAPTER  I. 

INTRODUCTORY. 

§  1.  Introduction  of  the  subject  of  the  present  treatise. 

§  4.  Early  history  of  building  associations. 

§  5.  Account  of    the  Greenwich  Union  Building  Association,  founded 

1809. 

§  6.  Growth  of  building  associations  in  America. 
§  7.  Primary  design  and  general  description  of  the  operation  of  the 

building  association  scheme. 
§  12.  Terminology  of  building  associations. 

Introduction  of  the  Subject  of  the  Present  Treatise. 

§  1.  The  building  association  is  an  institution  in  modern 
society.  Its  plan  was  designed  to  meet  the  wants,  and  accom- 
modate itself  to  the  peculiarities,  of  men,  whose  little  earnings 
can  be  only  slowly  raised  to  an  effective  bulk.  It  is  the 
creature  of  legislative  policy,  and  not  of  legislative  caprice. 
In  its  essential  plan  and  nature,  it  is  the  same  all  over  the  world, 
springing  from  the  same  considerations,  ministering  to  the 
same  necessities,  achieving  the  same  results.  The  similarity 
existing  between  the  statutes  and  usages  relating  to  building 
associations  in  the  various  States  and  countries  is  neither 
accident  nor  simply  imitation.  It  is  at  once  the  evidence 
and  the  recognition  of  identical  requirements  of  society  in  the 
various  communities. 

§  2.  This  identity  being  a  conceded  fact,  it  follows  that 
the  same  system  of  legal  and  equitable  principles  must  control 
the  relations  and  workings  of  building  associations  generally, 
subject  only  to  such  modifications  as  may  be  introduced  by 
statutes  and  rules  governing  any  particular  society,  or  the 


2  THE   LAW   OP  BUILDING   ASSOCIATIONS.  [CH.  1. 

societies  of  any  particular  State.  These  statutes  and  rules,  in 
turn,  are  all  framed  upon  substantially  the  same  plan,  elabo- 
rated by  many  years  of  practical  experience,  and  passed  by  a 
sjxjcies  of  tradition  from  land  to  land  and  from  society  to 
society.  Thus  the  same  regulations,  and  the  same  contracts 
under  them,  all  couched  in  very  nearly  identical  phraseology, 
have  been  for  years  before  the  courts,  and  "  there  is  scarcely  a 
word  in  them  that  is  superfluous  or  without  a  definite  mean- 
ing." '  There  are  probably  but  few  questions  capable  of 
arising  in  a  building  association,  which  have  not,  at  some  time 
or  other,  in  some  court  or  other,  received  such  adjudication 
as  will  furnish  a  guide,  if  not  an  absolute  rule,  in  the  determ- 
ination of  similar  questions  under  similar  circumstances. 

A  mere  compilation  of  these  decisions  would,  at  first 
blush,  seem  but  a  jumble  of  ill-considered  and  confused  con- 
tradictions, based,  without  logical  connection  between  them  or 
many  general  doctrines  of  law,  upon  the  circumstances  of 
each  special  case.  "  I  am  afraid  I  do  not  understand  them 
all,"  says  Sharswood,  Chief  Justice  of  Pennsylvania,  referring 
to  the  decisions  of  the  courts  of  his  Own  State  alone  upon  a 
single  class  of  building  association  cases."  Yet  these  associa- 
tions are,  all  over  the  world,  founded  on  a  few  plain,  identical 
principles  of  equity  and  fairness,  and  the  theory  of  their 
business  based  upon  immutable  mathematical  axioms.  These 
principles  and  these  axioms,  appealing,  perhaps  unconsciously, 
to  the  common  sense  and  justice  of  the  courts,  have  led  them, 
without  method,  with  very  little  reference  to  one  another,  yet 
always  in  fact  working  together,  to  establish,  in  isolated  de- 
cisions, a  body  of  law  applicable  to  building  associations, 
which,  when  understood  as  a  whole,  presents  a  most  perfect, 
complete  and  beautiful  system :  so  that,  whilst  there  is  an 
abundance  of  inconsistencies  between  judicial  utterances,  not 
only  in  different  States,  but  in  the  same  State  ;  not  only  be- 
tween the  grounds  taken  in  different  decisions,  but  between 
the  reasons  adduced  in  support  of  the  same  judgment, — there 
is  no  difficulty  in  discriminating  between  the  right  and  the 
wrong. 

§3.  It  is  the   primary  design  of  this  work  to  furnish  a 

i 

1  Ocmulgce  Building  Association        *  Jarrett  v.  Cope,  68  Pa.  St.  67. 
v.  Thomson,  52  Ga.  427. 


§  4.]  INTRODUCTORY.  3 

convenient  and  reasonably  complete  statement  of  the  princi- 
ples thus  established,  the  grounds  upon  which  they  rest,  and 
the  deductions  fairly  to  be  drawn  from  them ;  to  consider  the 
institution  of  building  associations,  their  formation,  nature, 
scope,  purposes,  powers  and  workings,  in  the  light  of  all  the 
•decisions  affecting  them ;  and  to  provide  the  means  of  arriv- 
ing at  a  prompt  understanding  of  the  true  character  of  any 
manifestation  of  the  scheme,  as  well  as  of  the  governing  legal 
principles :  in  a  word,  to  present  a  comprehensive  view  of 
the  system  of  law  applicable  to  Building  Associations. 

In  view  of  the  extraordinary  number  of  building  associa- 
tions scattered  over  the  entire  country ;  of  the  immense 
amount  of  capital  controlled  by  them ;  of  the  thorough  iden- 
tification of  the  largest  class  of  the  population  of  many  com- 
munities with  these  societies,  both  as  stockholders  and  as  bor- 
rowers, there  seems  to  be  no  apology  needed  for  a  work  of 
such  design. 

On  the  other  hand,  the  novelty  of  the  undertaking,  with 
no  treatise  of  similar  reach  upon  the  subject  to  suggest  even 
the  topics  to  be  considered,  or  the  arrangement  of  the  matter 
treated  of  ;  the  almost  total  absence  of  any*  apparent  reference 
in  the  decisions  of  the  courts  of  one  jurisdiction  to  those  of 
another ;  the  numerous  variations  introduced,  by  special  or 
general  statutes  and  by  recognized  usage,  in  the  methods  and 
forms  adopted  or  followed  in  the  several  States, — have  con- 
stituted difficulties  in  the  way  of  producing  a  work  of  gen- 
eral utility,  as  well  as  of  substantial  service  under  each  particu- 
lar system,  which  the  writer  can  hope  to  have  but  imperfectly 
overcome. 

Early  History  of  Building  Associations. 

§  4.  The  history  of  the  origin  and  early  growth  of  build- 
ing associations  is  involved  in  considerable  uncertainty.  It 
answers  no  practical  purpose  to  ascribe  to  them  a  fanciful 
antiquity,  reaching  back  to  the  days  of  the  Greek  republics. 
Nor,  owing  to  the  scarcity  of  literature  on  the  subject,  has  it 
been  possible  to  substantiate  the  supposition  (based  upon 
their  prevalence  and  flourishing  condition  in  Germany,  and 
in  the  German-peopled  sections  of  America,  as  well  as  the 
peculiarly  frugal  and  associative  tendency  of  the  Teutonic 
race,)  that  they  are  of  German  birth,  although  every  effort 


4  THE  LAW  OF  BUILDING  ASSOCIATIONS.  [CH.  I. 

has  been  made  to  obtain  authoritative  historical  information 
touching  these  institutions  in  that  country. 

Account  of  the  Greenwich  Union  Building  Association,  founded  1809. 
§  5.  The  first  association  of  this  kind,  of  whose  existence 
and  character  the  English  reports  furnish  evidence,  was  the 
Greenwich  Union  Building  Association,  founded  by  a  deed 
of  rules  and  regulations,  dated  the  7th  day  of  January,  1809.1 
Its  object  was  the  raising,  by  monthly  subscriptions,  of  a 
fund  or  capital,  to  be  laid  out  in  building  houses,  which  were 
to  be  divided  among  the  members,  under  and  subject  to  the 
rules  and  regulations  of  the  deed.  The  society  was  to  con- 
sist of  not  more  than  fifty  members,  holding,  in  the  aggregate, 
not  more  than  200  shares,  of  £210  each.  They  met  upon  the 
first  Thursday  in  every  month,  when  the  books  continued 
open  for  two  hours,  and  each  member  was  obliged  to  pay  two 
guineas  on  every  share  held  by  him,  until  £210  should  be 
paid  on  each  share.  The  first  default  in  making  the  pay- 
ment so  required,  subjected  the  delinquent  to  a  forfeiture  of 
2s.  6d.,  the  second  5*.,  the  third  10s.  Gd.,  and  if,  after  notice, 
he  should  still  refuse  to  comply  with  the  articles,  he  should 
be  excluded,  and  the  money  advanced  by  him  forfeited,  un- 
less he  should,  within  three  months  from  his  last  default, 
provide  a  person  who  should  be  voted  eligible  to  become  a 
member  of  the  Society.  In  such  case,  the  member  thus  sell- 
ing his  share  should  forfeit  ten  per  cent  upon  his  subscrip- 
tions for  the  benefit  of  the  Society,  unless  his  default  were 
excusable  on  the  ground  of  misfortune.  The  members  were 
to  draw  lots,  from  time  to  time,  as  often  as  the  funds  of  the 
Society  amounted  to  £100  clear.  Every  share  should  con- 
sist of  a  dwelling-house  of  the  best  materials,  to  be  completed 
in  a  workmanlike  manner.  The  tradesmen,  etc.,  to  be  em- 
ployed were  indicated  in  the  articles.  Every  house  must  be 
begun  within  one  week  after  notice,  roofed  within  three 
weeks,  and  finished  within  six  months ;  in  default  of  which  the 
tradesmen,  etc.,  forfeited  five  per  cent  upon  their  respective 

1  Pratt  t>.  Hutchinson,  15  East.  511;  -whom  the  credit  of  founding  the 

decided  May  1, 1812.  Seealso  Davis,  first  modern  building  society  has 

Law  of  Building,  etc.,  Societies,  2d  usually  been  assigned,  was  of  later 

ed.,  p.  1.     The  society  started  in  date,  the  year  generally  being  given 

Scotland  by  the  Earl  of  Selkirk,  to  as  1815. 


§  6.]  INTRODUCTORY.  5 

bills.  These  were  to  be  paid  by  the  treasurer  of  the  society 
only  upon  the  work  being  pronounced  satisfactory  by  the 
society's  surveyor.  And  from  the  time  such  house  was 
finished  the  member  owning  it  should  pay  to  the  Society  five 
per  cent  per  annum  on  the  £210  share,  so  drawn  and  ad- 
vanced, until  the  final  close  of  the  society,  when  each  mem- 
ber should  have  paid  his  £210  on  each  share  held  by  him. 
A  member  might  build  his  house  before  being  successful  in 
the  drawing ;  and  in  that  case,  whenever  his  turn  came,  he 
should  be  paid  £210  for  every  share  he  held,  provided  he  em- 
ployed, in  the  construction  of  his  house,  the  tradesmen,  etc., 
appointed  by  the  society.  If  the  member  had  not  himself 
paid  those  who  built  his  house  for  him,  the  treasurer  of  the 
society  was  to  do  so,  and  the  surplus  only,  if  anv,  of  the  said 
£210  was  to  be  paid  to  the  member.  Security,  to  the  satis- 
faction of  the  Society,  for  the  money  thus  advanced,  was  to  be 
placed  in  the  treasurer's  hands  until  the  final  winding  up  of 
the  concern ;  and  a  bond  was  executed  by  the  member  for 
the  payment  of  interest  on  the  sum  advanced  and  all  future 
payments  required  by  the  rules,  and  for  the  due  performance 
of  the  rules.  This  association  was  held  to  be  legal,1  and  it 
certainly  appears  that  the  fundamental  theory  and  practice 
of  a  terminating  building  association  were  already  well  com- 
prehended. 

Growth  of  Building  Associations  in  America. 

§  6.  In  the  year  1836,  twenty-seven  years  after  the  Green- 
wich Union  Building  Society  had  been  established,  and  in 
the  same  year  which  was  distinguished  in  Great  Britain  by 
the  passage  of  an  Act  of  Parliament'  affording  ample  facili- 
ties for  the  formation  of  building  associations  in  that 
country,  the  first  association  of  this  kind  in  America  was 
organized  in  Brooklyn  under  the  name  of  The  Brooklyn 
Building  and  Mutual  Loan  Fund  Association.3  After  that 
date,  they  began  to  crop  out  plentifully  throughout  the  east- 
ern section  of  the  country,  partly  as  unincorporated,  volun- 
tary associations,  partly  under  charters  obtained  by  virtue  of 

•Pratt  v.  Hutchinson,   15  East,         8  See  opinion  of  Lnrapkin,  J.,  in 
511.  Bibb   County  Loan  Association  v. 

*  6  and  7  Will.  IV.  c.  32.  Richards,  21  Ga.  592. 


6  THE   LAW   OF   BUILDING    ASSOCIATIONS.  [CH.  I. 

general  acts  of  the  several  commonwealths,  authorizing  the 
incorporation  of  beneficial  and  such  like  associations.  Their 
power  and  importance  grew  rapidly  during  the  feverish  era  of 
our  national  development  almost  immediately  preceding  the 
civil  war,  and  legislation  became  imperative.  The  decade  be- 
tween 1850  and  1860  comprises  the  period  when  most  of  the 
older  States,  already  thickly  strewn  with  building  associa- 
tions, made  the  first  attempts  at  statutory  regulation  of  the 
powers,  formation  and  management  of  these  societies.  Since 
then,  they  have  constituted  a  class  of  corporations  distinct 
and  different  from  every  other,  peculiar  in  their  privileges  as 
well  as  in  their  disabilities,  the  source  of  dispute  and  differ- 
ence of  opinion,  about  equally  witli  reference  to  the  applica- 
tion of  legal  principles,  and  in  respect  of  their  practical  util- 
ity. In  some  States,  they  have  proved  a  failure,  and  their 
formation  has  been  either  prohibited  or  abandoned.  In 
others  they  have  continued  to  prosper  and  multiply  until 
their  number  and  the  amount  of  capital  and  property  they 
control  is  at  this  day  truly  enormous. 

Primary  Design  and   General   Description   of  the  Operation   of  the 
Building  Association  Scheme. 

§  7.  The  idea  which  n'rst  gave  rise  to  the  institution  of 
building  associations ;  which  furnished  their  ostensible  and 
legitimate  raison  d'etre,  and  which  secured  to  them  their  pop- 
ularity and  their,  in  many  respects,  exceptionally  favored  po- 
sition before  the  law,  is  that  of  enabling  persons  belonging 
to  a  class  whose  earnings  are  small,  and  with  whom  the  slow- 
ness of  the  accumulation  discourages  the  effort,  to  become, 
by  a  process  of  gradual  and  compulsory  saving,  either  at  the 
end  of  a  certain  period,  or  by  anticipation  of  it,  the  owners 
of  homesteads.  The  operation  of  the  scheme  may  be  easily 
understood.1 

1  For  a  good  many  of  the  sugges-  atoga,  Sept.  9, 1881.  The  only  fault 
tions  contained  in  the  following  de-  I  have  to  find  with  that  gentleman's 
signedly  popular  description  of  the  exposition  is,  that  there  is  too  little 
building  association  scheme  1  am  stress  laid  upon  the  mission  of  a  build- 
indebted  to  a  lecture  reported  in  the  ing  association  to  make  its  members 
Philadelphia  Ledger  of  Sept.  16, 1881,  their  own  landlords,  a  point  which 
as  delivered  by  Addison  B.  Burke,  it  is  essential  to  keep  in  view,  in  or- 
Esq. ,  of  that  city,  before  the  Ameri-  der  to  understand  the  law  of  building 
can  Social  Science  Association  at  Sar-  associations  in  many  of  its  bearings. 


§  8.]  INTRODUCTORY.  7 

§  8.  Suppose  that  there  are  an  hundred  men  able  to  save 
live  dollars  out  of  their  monthly  earnings.  They  agree,  for 
the  purpose  of  united  action  and  mutual  encouragement,  to 
put  their  money  together  upon  fixed  days  every  month,  until 
the  whole  aggregate  shall  be  sufficient  to  pay  to  each  of  the 
hundred  associates  $1000  in  cash.  It  is  clear,  that  if  all  are 
prompt  in  their  payments,  the  treasure  will  be  ready  for  di- 
vision at  the  end  of  200  months ;  in  other  words,  letting  each 
monthly  payment  of  one  dollar  represent  a  "  share"  in  the 
common  fund,  each  share  will,  at  the  end  of  200  months,  be 
worth  a  fixed  par  value  of  $200.  This  period,  however,  will 
be  shortened  if,  after  each  monthly  collection  of  $500  has 
been  made,  that  sum  is  at  once  put  out  at  interest,  upon  some 
safe  investment,  with  the  addition  of  the  interest,  etc.,  accruing 
to  the  fund.  The  distribution  of  $200  to  each  share  may  be  fea- 
sible in,  say,  180  months,  when  each  associate  has.  in  fact,  paid 
only  $180  on  each  of  his  five  shares, — that  js.  has  paid  in 
$900  up  to  the  time  when  he  is  entitled  to  receive  $1000. 
Thus  far  we  have  simply  a  co-operative  savings  fund,  the 
stated  payments  being  periodical  and  compulsory.  But  the 
persons  who  started  this  association,  had  an  object  beyond  the 
mere  saving  of  money ;  they  desired,  through  it,  to  acquire 
houses,  homes.  When,  therefore,  the  question  of  investing 
the  money  arose,  it  was  found  that  it  might  be  made  the 
means  of  securing  to  some  of  the  members,  particularly  anx- 
ious to  "become  their  own  landlords,"  the  property  upon 
which  they  wished  to  build,  and  the  money  to  defray  the  ex- 
penses of  building,  they  paying  the  interest  upon  the  amount 
loaned  them.  In  this  way  the  money,  which  belonged  to  all, 
would  assist  the  individual,  and  he,  whilst  he  continued  to 
pay  his  monthly  instalments,  would,  in  paying  interest  on  the 
money  advanced  to  him,  in  fact  be  paying  it  in  part  to  him- 
self, and  would  himself  help  to  hasten  the  day  when  he 
would  be  entitled  to  participate  with  the  others  in  the  distri- 
bution of  the  common  fund,  his  share  in  which  might  then 
at  once  be  devoted  to  the  extinguishment  of  the  loan  he  had 
received.  Thus  he  would  get  his  house,  perhaps,  a  number  of 
years  before  his  monthly  payments  of  five  dollars  could  be 
expected  to  amount  to  a  sum  sufficient  to  pay  for  it;  and  yet 
those  small  payments,  being  kept  up  by  him,  would,  in  time, 


8  THE   LAW   OP   BUILDING    ASSOCIATIONS.  [CH.  I. 

equal  the  sura  he  had  borrowed,  and  he  would  have  his  house 
free,  virtually  paying  for  it  in  instalments  of  five  dollars 
monthly,  and  the  interest  on  the  amount  he  had  borrowed. 
Such  a  bargain  he  could  get  nowhere  else,  and  it  stands  to 
reason  that  more  than  one  member  should  endeavor  to  obtain 
the  advantage  of  being  able  to  pay  so  gradually  for  his  house, 
and  yet  have  it  all  his  very  own.  Hence,  whenever  there  is 
a  sum  of  money  ready  for  investment,  there  will  probably  bo 
a  number  of  applicants,  and  it  will  be  a  matter  of  embarrass- 
ment to  know  to  whom  to  give  the  loan.  But  this  awkward- 
ness is  again  turned  into  a  source  of  profit.  Among  those 
who  apply  there  will  be  some  to  whom,  for  various  reasons, 
the  accommodation  may  be  of  considerably  more  moment 
than  to  others.  It  will  be  worth  more  to  some  than  to  the 
rest,  and  this  difference  will  probably  be  capable  of  expression 
in  dollars  and  cents.  The  loan,  therefore,  is  put  up  at  a  sort 
of  auction.  Various  members,  desirous  of  obtaining  it,  bid 
against  each  other  for  the  preference,  agreeing  that  they 
will  receive  the  sum  offered,  less  the  amount  bid  by  them. 
This  difference,  the  borrower's  bid,  is  called  the  premium  or 
bonus,  which  he  undertakes  to  pay,  together  with  the  amount 
actually  received  by  him,  the  two  constituting  his  whole 
debt,  to  be  discharged  in  the  same  manner  and  at  the  same 
time.  It  is  a  rule  with  these  societies  that  a  member's  in- 
debtedness by  loan  shall  not  exceed  the  paid-up  value  of  the 
number  of  shares  he  holds  in  the  association. 

Thus  it  appears  that  the  association,  in  turning  over  the 
moneys  coining  in  with  regularity  every  month,  has  the  bene- 
fit of  two  sources  of  profit, — interest  on  loans  to  its  mem- 
bers, and  premiums  for  the  preference  of  the  loans.  The 
accumulation  is,  therefore,  far  more  rapid  than  if  it  enjoyed 
the  former  only ;  and  it  may  be  supposed,  that,  barring  any 
unforeseen  losses  and  calamities,  all  will  be  ready  for  the 
final  distribution  of  $1000  to  each  member  in,  say,  140 
months. 

§  9.  But  all  members  are  not  uniformly  punctual  and  pre- 
cise in  their  habits.  Some  one  may  fail,  in  the  course  of 
time,  to  pay  an  instalment  as  it  becomes  due.  In  such  a  case 
the  member  who  defaults  will  injure  his  fellows.  He  de- 
prives the  society  of  the  use  of  the  amount  due  from  him, 


§  10.]  INTRODUCTORY.  9 

and  yet,  having  an  equal  interest  with  all  in  the  common 
fund,  he  will  eventually  lose  only  his  proportionate  share  of 
the  possible  profit  upon  his  unpaid  deposit,  which  will  be 
more  than  compensated  (remembering  that  he  has  in  addi- 
tion retained  the  money  he  ought  to  have  paid  in)  by  the 
gain  he  makes,  to  the  extent  of  his  interest  in  the  profits  of 
the  common  fund,  from  the  gains  upon  the  deposits  of  other 
more  conscientious  members.  To  counterbalance  this  loss  to 
the  society,  and  to  check  any  tendency  of  imposing  upon  it 
in  this  manner,  a  fine  is  put  upon  unpaid  instalments  or  de- 
posits of  an  amount  slightly  in  excess  of  the  possible  profit 
which  might  have  been  made  upon  the  unpaid  instalment. 
Thus,  neither  does  the  defaulter  gain  anything  by  his  delin- 
quency, nor  is  the  society  a  loser  through  his  negligence. 
Yet  it  is  an  irregularity  which  embarrasses  the  business,  and 
as  the  success  of  the  enterprise  rests  upon  the  continued  zeal, 
faithfulness  and  economy  of  its  members,  persistent  neglect 
of  duty  makes  any  particular  individual  a  nuisance  to  all  the 
rest.  If.  therefore,  he  perseveres  in  his  dereliction,  the  so- 
ciety reserves  to  itself  the  right  of  shaking  him  off.  In  such 
case  he  forfeits  his  interest  in  the  concern,  and  ceases  to  be  a 
member. 

§  10.  But  circumstances  may  arise,  when,  without  any 
personal  fault,  a  member  finds  it  impossible  to  keep  up  his 
payments,  or  when,  for  some  reason  or  other,  it  becomes 
necessary  or  advisable  for  him  to  withdraw  from  the  society. 
There  has  been,  it  must  be  supposed,  no  dereliction  on  his 
part,  and  hence  nothing  savoring  of  penalty  can  be  properly 
imposed  upon  him.  Yet  it  would  be  almost  impossible, 
taking  into  account  his  original  assumption  to  participate  in 
the  scheme,  without  intermediate  return  of  profits,  until  the 
time  agreed  upon  for  separation  has  arrived,  to  figure  out 
precisely  what  his  interest  may  be  worth  at  any  given 
moment.  The  funds  of  the  society  are  invested  ;  upon  them 
there  may  be  losses  which  cannot,  as  yet,  be  estimated.  The 
membership  may  dwindle  down,  and  embarrassments  arise 
in  consequence.  The  premiums  may  be  high  during  the 
next  few  years,  or  money  may  be  very  free,  and  premiums 
low,  in  the  one  case  making  profits  large,  in  the  other  reduc- 
ing them  to  a  minimum;  in  the  one  case  admitting  of  a 


10  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.  I. 

speedy  winding  up,  in  tlio  other  postponing  it  even  beyond 
the  estimated  period  of  dissolution,  and  requiring  an  unex- 
pectedly prolonged  continuance  of  stock  payments.  The 
effect  of  all  these  uncertainties  is  such  that  it  would  embar- 
rass the  society  exceedingly,  were  they  obliged,  at  the  instance 
of  any  member,  however  well  justified,  at  any  time  to  take 
an  account,  and  estimate  exactly  the  amount  he  would  be  en- 
titled to  receive  as  his  present  interest  in  the  society's  future 
accumulations.  To  avoid  this  contingency,  and  yet  do  sub- 
stantial justice  to  the  individual,  provision  is  made  in  the 
organic  law  of  the  society,  to  enable  a  member  desirous  of 
withdrawing  to  receive  from  the  society,  upon  proper  notice 
given  it  of  his  intention,  a  sum  equal  to  what  he  has  paid 
in,  with  the  addition  of  a  certain  percentage  in  liquidation 
of  and  representing  his  proportion  of  the  profits  of  the  busi- 
ness. He  then  surrenders  his  stock  for  cancellation  and 
withdraws  from  the  membership.  If  the  business  of  the 
society  and  its  legal  powers  warrant  it,  new  shares  are  issued, 
i.e.  new  members  taken  in,  in  the  place  of  those  withdrawn 
or  forfeited,  and  back  payments  demanded  from  them  suf- 
ficient to  put  them  on  an  equal  footing,  as  to  the  amount 
already  paid  and  gained  upon  the  old  shares,  with  the  rest  of 
the  members. 

§  11.  It  will  be  readily  understood,  that,  in  such  a  society, 
the  demand  for  money  will  at  first  be  brisk  and  premiums 
rule  high.  In  course  of  time,  this  demand  slackens,  premi- 
ums fall  off,  and  eventually  it  becomes  difficult  to  dispose  of 
the  money  to  the  members.  Other,  outside  investments 
must  be  made.  At  last  it  is  found  that  the  money  on  hand, 
and  the  securities  representing  money,  are  sufficient,  after 
payment  of  all  expenses,  to  cancel  all  the  obligations  given 
by  members  to  the  society,  and  to  distribute  to  those  who 
have  received  no  loans  the  full  amount  of  $200  on  each  share, 
or,  upon  our  supposition,  $1000  to  each  member  who  has  bor- 
rowed nothing,  and  to  surrender  the  securities  given  by  those 
who  have  bought  out  their  shares.  The  association  is  then, 
technically  speaking,  "  wound  up,"  that  is,  its  business  of 
receiving  deposits  from  its  members  is  closed,  interest  on 
the  obligations  of  members  to  the  society  ceases,  and  the 
obligations  themselves  are  vacated,  moneys  due  from  out- 


§  13.]  tNTHOJDUCTOKY.  11 

eiders  collected,  lands  held  by  the  society  sold  off,  and  the 
fund,  after  payment  of  all  expenses,  distributed  among  the 
unadvanced  members. 
Terminology  of  Building  Associations. 

§  12.  It  remains  to  explain,  in  a  few  words,  some  phrases 
which  have  come  to  be  stereotyped  and  accepted  in  certain 
well-defined  meanings,  in  the  business  language  of  building 
associations,  and  which,  for  the  sake  of  brevity,  will  be  here- 
after used  in  this  treatise. 

The  capital  or  stock,  that  is  to  say,  the  fund  which  the 
association  expects  to  have  accumulated  within  the  period 
fixed  for  its  duration,  and  the  readiness  of  which  to  be 
divided  in  cash  or  by  cancellation  of  obligations  marks  that 
period,  is  divided  into  shares,  to  which  is  given  a  fixed  par 
or  paid-up  value.  This  value  represents  the  amount  which 
these  shares  are  expected  to  be  worth,  when,  together  with 
the  profits  upon  investments,  etc.,  the  numerous  small  sums 
which  have  been  paid  up  by  the  members  have  swelled  to  the 
bulk  contemplated  at  the  outset.  The  actual  value  of  the 
share,  which  is  a  very  different  thing,  may  be  very  small 
indeed,  during  the  first  year  of  the  society's  life.  But 
the  par  QY  paid-up  value  is  fixed  from  the  beginning.  When 
the  two  coincide  the  course  is  run,  for,  whilst  in  manufac- 
turing and  other  business  corporations,  the  capital  stock 
is  merely  the  instrument  through  which  their  objects  are 
effected,  and  its  payment,  at  least  to  a  large  proportion,  a  pre- 
requisite to  their  operations,  building  associations  have  accom- 
plished the  purposes  of  their  organization  the  moment  the 
stock — by  virtue  of  the  periodical  payments  made  by  its 
members,  and  the  gains  realized  therefrom  and  placed  to  the 
credit  of  the  association,  each  member  having  an  interest 
therein,  proportionate  to  the  number  of  shares  held  and 
paid  on  by  him — is  paid  up  to  the  amount  ascertained  and 
limited  by  the  charter  of  the  association.  The  fixed  peri- 
odical payments  to  be  made  on  each  share  of  stock  are 
the  "  stock  payments,"  "instalments"  "subscriptions,"  or 
"dues." 

§  13.  Corresponding  in  amount  with  the  par  value  of  the 
share  is  the  " loan"  A  member  being  entitled  to  a  loan  for 
every  share  of  stock  he  holds,  the  money,  which  at  any  time 


12  THE   LAW   OP  BUILDING   ASSOCIATIONS.  [CH.  I. 

the  association  is  prepared  to  place,  is  divided  into  lots  each 
equal  to  the  paid-up  value  of  a  share.  These  lots  are  called 
loans,  and  are  bid  for  separately,  a  member,  however,  having, 
in  general,  a  right  to  take  as  many  loans  as  his  stock  interests 
entitle  him  to,  at  the  figure  or  discount  agreed  to  on  the  first. 
This  discount,  the  sum  bid  or  offered  by  the  member  desir- 
ing the  loan,  the  price  of  his  preference,  is  the  "premium" 
or  "  bonus." 

When  a  member  receives  a  loan  by  virtue  of  his  stock 
interest  in  the  society,  he  practically  anticipates  his  future 
dividend ;  he  is  therefore  an  "  advanced  "  member,  a  "  bor- 
rower" as  contradistinguished  from  an  "investor"  who 
merely  goes  on  depositing  his  monthly  instalments  without 
taking  a  loan.  The  share,  upon  the  strength  of  being  the 
holder  of  which,  he  obtained  the  advance,  is  said  to  be 
" redeemed"  as  to  the  building  association ;  " bought  out"  as 
to  the  borrower. 

§  14.  The  withdrawal  of  a  member  is  his  voluntary  ces- 
sation of  membership  in  the  society,  attended  with  all  the 
rights  and  advantages  secured  by  statute,  or  by  the  rules  of 
the  organization,  to  persons  desiring  to  sever  their  connection 
with  the  same  previously  to  its  expiration,  but  without  los- 
ing the  benefit  of  their  past  payments.  Before,  however, 
the  privileges  of  withdrawal  can  be  claimed,  the  withdrawal 
notice,  setting  forth  the  intention  of  the  party,  must  have 
been  given  to  the  society.  When  the  latter  has  accumulated 
an  amount  sufficient  to  distribute  to  each  unredeemed  share 
its  fixed  par  value,  and  to  cancel  the  loans  granted  upon 
those  that  were  bought  out,  it  is  ready  for  "  winding-up" 
i.e.,  the  closing  of  its  business  and  the  dissolution  of  its  cor- 
porate existence. 

§  15.  The  variety  of  the  nomenclature  with  which  it  has 
been  sought  to  express  the  peculiar  character  and  office  of  these 
institutions  is  very  perplexing.  Building  and  savings  associa- 
tions, mutual  benefit  building  societies,  loan  fund  associations, 
homestead  associations,  mutual  loan,  savings  and  building 
associations,  building  and  loan  associations,  co-operative  sav- 
ings or  saving  and  loan  associations,  are  but  a  few  of  them. 

The  shortest  name  has  been  chosen  for  the  purposes  of  this 
treatise,  partly  because  the  societies  are,  it  is  believed,  more 


§  17.]  STATUTOEY   PROVISIONS  OF  THE  STATES.  13 

generally  and  popularly  known  as  building  associations  than 
by  any  other  phrase  ;  and  partly,  also,  because  it  is,  after  all, 
looking  at  the  fundamental  principles  and  purposes  which 
recommend  the  scheme,  not  more  apt  to  mislead  than  some 
of  the  other  names,  which  are  besides  more  difficult  to 
handle. 


CHAPTER  II. 

STATUTORY  PROVISIONS    OF  THE   SEVERAL  STATES  OF  THE   UNION* 

§  16.  General  observations.  §  29.  Nebraska. 

§  18.  Alabama.  §  30.  New  Jersey. 

§  19.  California.  §  31.  New  York. 

§  20.  Illinois.  §  32.  North  Carolina. 

§21.  Indiana.  §33.  Ohio. 

§  22.  Iowa.  §  34.  Pennsylvania. 

§  23.  Kansas.  §  35.  Virginia. 

§  24.  Maryland.  §  36.  West  Virginia. 

§  25.  Massachusetts.  §  37.  Wisconsin. 

§  26.  Michigan.  §  38.  States  in  which  building  as- 

§  27.  Minnesota.  sociatious  are  incorporated  by  special 

§  28.  Missouri.  acts.     Connecticut. 

General  Observations. 

§  16.  The  general  plan  described  in  the  preceding  chapter 
forms  the  model  after  which,  all  over  the  world,  these  socie- 
ties are  organized.  Infinite  as  are  the  varieties  and  diversities 
of  their  details,  their  essential  features  will  be  found  to  be 
substantially  similar.  The  most  notable  differences,  indeed, 
are  more  in  the  extent  or  limitation  of  the  powers  conceded 
to  building  associations  than  in  the  kind  and  nature  of  these 
powers.  At  the  same  time,  the  decisions  of  the  several  courts, 
in  a  large  number  of  cases,  are  merely  interpretations  of  stat- 
utes, rather  than  expositions  of  general  principles.  The  com- 
parison of  statutes  is,  therefore,  a  most  powerful  auxiliary  to 
the  perfect  understanding  of  the  law  as  laid  down. 

§  17.  It  is  the  purpose  of  this  chapter  to  exhibit  the  stat- 
utes of  the  several  States,  as  and  where,  at  the  present  time, 
such  are  in  force.  In  the  later  portions  of  this  treatise,  it 
would  obviously  be  impossible  to  refer,  whenever  discussing 
any  feature  or  incident  of  the  building  association  scheme, 


14  THE  LAW   OF  BUILDING   ASSOCIATIONS.          [CH.  LL 

to  the  statutory  regulations  throughout  the  Union  upon  the 
subject.  Such  reference,  if  desired,  can  be  readily  had  in 
this  chapter,  the  States  being  arranged  alphabetically  and  the 
statutes  given  in  full.  It  has,  therefore,  appeared  advisable 
to  refrain,  in  the  body  of  the  work,  from  any  express  refer- 
ence to  this  chapter,  it  being  presumed  that  comparisons  will 
of  course  be  made  whenever  necessary.1 

§  18.  Alabama.8  (a)  When  two  or  more  persons  are  de- 
sirous of  forming  a  ...  building  and  loan  association, 
.  .  .  and  of  becoming  incorporated,  such  persons  must  make 
a  declaration  in  writing,  stating : 

1.  The  name  of  the  company,  or  association,  and  the  object 
for  which  it  is  formed. 

2.  The  amount  of  capital  stock,  and  the  number  of  shares 
into  which  the  same  is  divided. 

3.  The  names  of  stockholders  and  number  of  shares  held 
by  each.1 

(J)  This  declaration,  signed  by  the  stockholders,  must  be 
recorded  in  the  office  of  the  judge  of  probate  of  the  county 
or  counties  in  which  such  business  is  to  be  carried  on.4 

(c)  Upon  the  filing  and  recording  of  such  declaration,  the 
persons  who  have  signed  the  same,  and  their  successors,  be- 
come a  body  corporate  by  the  name  stated  therein,  and  with 
the  powers  conferred  on  private  corporations  by  this  code.* 

(d)  All  shares  are  transferable  on  the  books  of  the  com- 
pany, and  in  all  votes  to  be  given  by  the  stockholders  each 
share  is  entitled  to  one  vote.* 

(e)  No  company  incorporated  under  the  provisions  of  this 
chapter  shall  continue  f 01  a  longer  term  than  twenty  years, 
unless  renewed  according  to  the  provisions  thereof  within  one 
year  before  the  expiration  of  its  term.7 

1  See  post,  §  38.  cerning  real  estate, — repeal  of  Rev. 

8  See  Code  of  Alabama,  1876,  §§  Code,  1867,  §§  1756-7). 

1937-1943;  372.   Decisions  touching  «  Code,  §  1937;  Act  Mar.  3, 1870, 

Building  Associations  in  Alabama:  p.  308. 

Selma  Building  and  Loan  Associa-  4  Code,  §  1938;  see  Act  Jan.  27, 

tion  v.  Morgan,  57  Ala.  33  (taxation);  1872,  p.  74. 

Kelly  v.  Mobile  Building  and  Loan  *  Code,  §  1939. 

Association, 64  Ala. 501  (loans,— con-  •  Code,  §  1940. 

formity  with  bylaws,— ejectment);  '  Code,  §  1941;  see  Act  Feb.  25, 

Cahall  v.  Citizens'  Mutual  Building  1871,  p.  18. 
Association,  61  Ala.  232  (powers  con- 


§  18.]  STATUTORY   PROVISIONS  OF  THE  STATES.  .ft 

(f)  A  copy  of  the  declaration,  recorded  according  to  the 
provisions  of  this  chapter,  duly  certified  by  the  judge  of  pro- 
bate in  whose  office  the  same  is  recorded,  is  evidence  of  the 
incorporation,  and   also  presumptive  evidence,  in  any  action 
brought  against  such  corporation,  of  the  facts  stated  therein.1 

(g)  Such  associations  shall  have  power : 

1.  To  levy  monthly  contributions  from  the  shareholders, 
not  to  exceed  one  dollar  per  share  in  every  month. 

2.  To  compel  payment  and  compliance  with  all  lawful 
orders,  by  fines  and  forfeitures. 

3.  To  acquire  real  estate,  to  erect  buildings,  and  to  let  the 
same  to  any  shareholder  of  the  corporation,  or  to  sell  to  such 
shareholder  on  such  terms  as  may  be  fixed  by  its  by-laws. 

4.  To  aid  shareholders  in  the  erection  or  improvement  of 
houses  by  loans  of  the  funds  of  the  association,  on  such  security 
as  may  be  fixed  by  the  by-laws. 

5.  When  funds  are  on  hand,  to  lend  the  same  to  any  share- 
holder of  the  corporation  on  such  security  and  on  such  terms 
and  conditions,  as  may  be  prescribed  by  the  by-laws,  but  the 
eecurity  shall  be  a  mortgage  on  real  estate,  sufficient  to  pro- 
tect the  association. 

6.  When  deemed  advisable,  or  when  two  or  more  share- 
holders desire  to  borrow  funds  on  hand,  the  association  may 
lend  such  funds  to  the  highest  bidder ;  and  all  shareholders 
shall  have  equal  opportunities  to  bid,  under  such  regulations 
as  may  be  prescribed  by  the  by-laws ;  but  no  shareholder  shall 
borrow,  or  purchase  the  loan  of  more  than  two  hundred  dollars 
for  each  share  held  by  him. 

7.  To  prescribe  a  uniform  scale  of  monthly  instalments,  in 
which  the  loans  made  are  to  be  repaid  according  to  the  terms 
agreed  on,  and  if  loaned  to  the  highest  bidder,  according  to 
the  terms  of  the  purchase. 

8.  To  secure  the  payment  of  instalments  and  loans,  and  a 
compliance  with  all  the  terms  on  which  loans  are  purchased, 
by  mortgages,  with  power  of  sale,  on  real  estate,  and  the 
same  to  foreclose  hi  case  of  default  by  a  public  sale  to  the 
highest  bidder,  and  by  conveyance  to  the  purchaser,  and  such 
purchaser  need  not  be  a  shareholder. 

>  Code,  §  1943. 


16  THE   LAW  OF   BUILDING   ASSOCIATION'S.         [CH.  II. 

9.  In  determining  the  amount  of  capital  stock  of  the  associ- 
ation, each  share  shall  be  valued  at  forty  dollars.1 

(7t)  In  listing  and  assessing  the  property  of  building  and 
loan  associations  of  this  State,  the  tax-assessor  shall  not,  under 
the  head  of  "  solvent  creditors,"  or  elsewhere,  include  the  notes 
and  mortgages  of  the  stockholders  or  members  of  such  associ- 
ations, given  to  the  associations  for  purchases  of  money  or 
advances  of  stock,  made  at  the  distribution  of  the  funds  there- 
of ;  and  that  all  claims  for  such  taxes,  which  have  been  made, 
and  which  have  not  been  collected,  are  hereby  released  and 
remitted  ;  but  such  associations  shall  be  liable  for,  and  shall 
pay  taxes  on  the  largest  average  amount  of  money  held  by 
them  at  any  one  time  during  the  year  next  preceding  the  time 
for  the  assessing  of  the  taxes  therein.8 

§  19.  California.8  (a)  Corporations  organized  for  the 
erection  of  buildings,  and  making  other  improvements  on  real 
property,  may  raise  funds  in  shares  not  exceeding  two  hundred 
dollars  each,  payable  in  periodical  instalments.  Such  bodies 
are  known  as  land  and  building  corporations,  and  may  be  or- 
ganized with  or  without  a  capital  stock.* 

(5)  Any  such  corporation  may  borrow  money  for  the  pur- 
pose of  carrying  out  its  objects,  and  may  give  as  security 
therefore  its  shares,  or  mortgage  upon  its  real  estate.' 

(c)  Any  such  corporation  may  purchase  real  estate  and 
erect  buildings  for  its  members,  and  make  loans  to  its  mem- 
bers for  the  purpose  of  aiding  them  in  acquiring  and  improv- 
ing real  estate.     Such  loans  must  in  all  cases  be  secured  on 
such  real  estate." 

(d)  Such  corporation  may  insure  in  some  life  insurance 
company,  incorporated  under  the  laws  of  this  State,  the  lives 
of  its  members  and  debtors.     In  case  of  the  death  of  a  mem- 
ber or  debtor  so  insured  the  amount  recovered  on  the  policy 
must  be  applied  to  cover  the  indebtedness,  including  the 

1  Code,  §  1943;  see  Act  Mar.  3,  the  English  freehold  land  societies 

1870,  p.  444,  sec.  2.  and  649  repealed.    See  Amendment 

9  Code,  §  372;  Act  Feb.  9,  1877,  to  Code,  1873-4,  p.  217. 

p.  19.  *  So  amended,  in  Amendment  to 

1  See  California  Civil  Code,  §  872,  Code,  1873-4,  p.  217. 

§§  639-648,  §  646.    The  society  here  6  Code,  §  640. 

contemplated  seems  to  be  more  like  •  Code,  §  641. 


§  19.]  STATUTORY   PEOVISIOKS  OF  THE  STATES.  17 

premium  paid,  and  the  residue,  if  any,  must  be  paid  to  the 
legal  representatives  of  the  decedent.1 

(e)  Any  such  corporation  may  purchase,  hold  and  convey 
real  estate  as  follows : 

1.  The  lot  and  building  in  which  the  business  of  the  cor- 
poration is  carried  on,  the  cost  of  which  must  not  exceed 
twenty  thousand  dollars ; 

2.  Such  as  may  from  time  to  time  be  necessary  to  supply 
the  wants  of  its  members,  the  cost  of  which,  held  unallotted 
to  the  members  thereof  at  any  one  time,  must  not  exceed  the 
sum  of  one  hundred  thousand  dollars ; 

3.  Such  as  shall  have  been  mortgaged,  pledged,  or  con- 
veyed to  it  in  trust,  to  secure  money  loaned  or  to  secure  the 
purchase  price  thereof  in  pursuance  of  the  regular  business  of 
the  corporation.8 

(f)  The  bylaws  of  such  corporations  must  specify  the 
amount  of  the  periodical  subscriptions  or  payments   to   be 
made  by  each  member ;  the  time  and  manner  in  which  such 
payments  are  to  be  made ;  the  fines  and  forfeiture  for  de- 
fault ;  the  time  and  manner  of  election  of  directors  and  other 
officers,  and  their  terms  of  office ;  the  manner  in  which  the 
real  estate  may  be  distributed,  allotted,  or  sold  to  its  mem- 
bers ;   the  terms  and  conditions  upon  which  loans  may  be 
made  to  its  members  and  by  them  repaid  to  the  corporation  ; 
the  manner  in  which  a  person  may  become  and  cease  to  be  a 
member ;  the  conditions  on  which  members  may  withdraw 
from  the  corporation,  and  the  provisions  for  the  payment  to 
withdrawing  members  of  the  sums  of  money  due  to  them,  aris- 
ing from  subscriptions  or  payments,  and  the  proportion  of  the 
profits  such   withdrawing  members  may  receive   on  with- 
drawal.8 

(g)  The  secretary  of  any  such  corporation  must  once  in 
each  year,  during  the  existence  of  the  corporation,  prepare  a 
full  and  explicit  statement  of  the  financial  affairs  thereof, 
comprising  a  balance  sheet,  statement  of  receipts  and  expen- 
ditures, profit  and  loss,  and  assets  and  liabilities,  which  must 
be  audited  and  verified  by  two  competent  persons  (not  direc- 
tors) elected  by  the  general  body  of  shareholders,  and  be 
countersigned  by  the  president  and  secretary.     A  copy  of 

1  Code,  §  642.  «  Code,  §  643.  »  Code,  §  644. 


18  THK    LAW   OP   BUILDING   ASSOCIATIONS.          [CH.  II. 

such  statement  must  be  printed  and  circulated  among  the 
members,  and  appear  immediately  after  the  annual  meeting 
of  the  corporation  daily  at  least  one  week,  or  weekly  at  least 
fonr  weeks,  in  one  or  more  newspapers  published  at  the 
place  of  the  principal  business  of  the  corporation.1 

(A)  Any  two  or  more  such  corporations  may  unite  and 
become  incorporated  in  one  body  with  or  without  any  disso- 
lution or  division  of  the  funds  of  such  corporation,  or  either 
of  them  ;  or  any  such  corporation  may  transfer  its  engage- 
ments, funds,  and  property  to  any  other  such  corporation, 
upon  such  terms  as  may  be  agreed  upon  by  two-thirds  of  the 
members  of  each  of  such  bodies  present  at  general  meetings 
of  the  members,  convened  for  the  purpose  by  notice  stating 
the  object  of  the  meeting,  sent  through  the  post-office  to 
every  member,  and  by  a  general  notice,  appearing  daily,  at 
least  one  week,  or  weekly  at  least  two  weeks,  in  some  news- 
paper published  at  the  place  of  the  principal  business  of  the 
corporation  ;  but  no  such  transfer  can  prejudice  any  right  of 
any  creditor  of  either  corporation.* 

§  20.  Illinois.*  (a)  Whenever  any  number  of  persons  not 
less  than  tive,  may  desire  to  become  incorporated  as  a  mutual 
building,  loan  and  homestead  association,  for  the  purpose  of 
building  and  improving  homesteads,  and  loaning  money  to 
the  members  thereof  only,  they  shall  make  a  statement  to 
that  effect  under  their  hands  and  seals,  duly  acknowledged 
before  some  officer  in  the  manner  provided  for  the  acknowl- 
edgment of  deeds  ;  such  statement  shall  set  forth  the  name  of 
the  corporation,  its  capital  stock,  its  location  and  the  duration 
of  the  corporation  ;  which  statement  shall  be  tiled  in  the  office 
of  the  Secretary  of  State.  The  Secretary  of  State  shall  there- 
upon issue  to  such  persons  a  license  as  commissioners,  to  open 
books  for  subscription  to  the  capital  stock  of  said  corporation, 
at  such  time  and  place  as  they  may  determine  ;  but  no  license 
shall  be  issued  to  two  associations  having  the  same  name/ 

1  Code,  §  645.     Section  646  is  re-  Chicago  Building  Society  v.  Crowell, 

pealed;    see  Amendment  to  Code,  65  111  453  (power  to  stipulate  for  in- 

1873-4,  p.  217.  surance  incident  to  power  to  take 

*  Code,  §  647.  security, — measure  of  damages  for 

8  Act  July  1,  1879,  Laws  of  Illi-  breach  of  such  stipulation), 

nois,    1879,   pp.    83-87.     Decision:  *  §  1. 


§  20.]  STATUTOBY   PROVISIONS  OF  THE  STATES.  19 

(&)  As  soon  as  one  hundred  shares  or  more  shall  be  sub- 
scribed, the  commissioners  shall  convene  a  meeting  of  the  sub- 
scribers, for  the  purpose  of  electing  directors,  adopting  a  char- 
ter and  by-laws,  and  the  transaction  of  such  other  business  as 
shall  come  before  them.  Notice  thereof  shall  be  given  by 
depositing  in  the  post-office  properly  addressed  to  each  sub- 
scriber, at  least  ten  days  before  the  time  fixed,  a  written  or 
printed  notice,  stating  the  object,  time  arid  place  of  such  meet- 
ing. Directors  of  such  corporations  organized  under  this  act 
shall  be  elected,  classified  and  hold  their  office  for  such  period 
of  time  as  is  provided  by  general  law  governing  the  election 
and  classification  of  Directors,  Trustees  or  Managers  of  cor- 
porations.1 

(c)  The  commissioners  shall  make  a  full  report  of  their 
proceedings,  including  therein  a  copy  of  the  notice  provided 
for  in  the  foregoing  section,  a  copy  of  the  subscription  list, 
a  copy  of  the  charter  and  by-laws  adopted  by  the  association, 
and  the  names  of  the  Directors  elected  and  their  respective 
terms  of  office,  which  report  shall  be  sworn  to  by  at  least  a 
majority  of  the  commissioners,  and  shall  be  filfed  in  the  office 
of  the  Secretary  of  State.    The  Secretary  of  State  shall  there- 
upon issue  a  certificate  of  the  complete  organization  of  the 
corporation,  making  a  part  thereof  a  copy  of  all  papers  filed 
in  his  office  in  and  about  the  organization  of  the  corporation 
and  duly  authenticated  under  his  hand  and  seal  of  State  ;  and 
the  same  shall  be  recorded  in  the  office  of  the  Recorder  of 
Deeds  in  the  county  in  which  the  principal  office  of  such  com- 
pany is  located.     Upon  the  recording  of  said  copy  the  corpor- 
ation shall  be  deemed  fully  organized  and  may  proceed  to 
business ;  unless  such  company  shall  be  organized  and  shall 
proceed  to  business  as  provided  in  this  act  within  two  years 
after  the  date  of  such  license,  the  license  shall  be  deemed  re- 
voked and  all  proceedings  thereunder  void.4 

(d)  Corporations  formed  under  this  act  shall  be  bodies 
corporate  and  politic  for  the  period  for  which  they  are  organ- 
ized ;  may  sue  and  be  sued ;  may  have  a  common  seal  which 
they  may  alter  or  renew  at  pleasure.8 

(<?)  The  corporate  powers  shall  be  exercised  by  a  Board  of 
Directors:  /V^.vV/W.  the  number  of  Directors  shall  not  be  in- 
1  §  2.  »  $  3.  « g  4. 


20  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

creased  or  diminished,  nor  their  term  of  office  changed,  with- 
out the  consent  of  the  owners  of  two  thirds  of  the  shares  of 
stock.  The  officers  of  the  company  shall  consist  of  a  Presi- 
dent, Vice-President,  Secretary  and  Treasurer,  to  be  elected  at 
the  annual  meeting  of  the  Board  of  Directors,  as  may  be  pro- 
vided for  in  the  charter  and  by-laws  of  the  Association  :  Pro- 
vided, that  the  Secretary  only  shall  be  entitled  to  compensa- 
tion, and  in  such  amount  as  may  be  provided  for  in  the  char- 
ter of  such  Association :  and  Provided,  that  the  treasurer 
shall  give  bond  and  security  to  be  approved  by  the  board  of 
directors.1 

(f)  The  shares  of  stock  shall  be  one  hundred  dollars 
each,  and  shall  be  deemed  personal  property  transferable  upon 
the  books  of  the  company,  in  such  manner  as  may  be  pro- 
vided by  the  by-laws,  and  subscriptions  therefor  shall  be 
made  payable  to  the  corporation,  and  shall  be  payable  in  such 
periodical  instalments  and  at  such  time  or  times  as  shall  be 
determined  by  the  charter  and  by-laws ;  but  no  periodical  pay- 
ment to  be  made  exceeding  two  dollars  on  each  share ;  and 
every  share  of  stock  shall  be  subject  to  a  lien  for  the  payment 
of  unpaid  instalments,  and  other  charges  incurred  thereon 
under  the  provisions  of  the  charter  and  by-laws,  and  the  by- 
laws may  prescribe  the  form  and  manner  of  enforcing  such 
lien.  New  shares  of  stock  may  be  issued  in  lieu  of  shares 
withdrawn  or  forfeited,  and  the  stock  may  be  issued  in  one 
or  in  successive  series,  as  may  be  prescribed  in  the  charter 
and  by-laws,  and  in  such  amount  (not  to  exceed  the  total 
capital  stock)  as  the  Board  of  Directors  may  determine,  and 
any  stockholder  wishing  to  withdraw  from  the  said  corpor- 
ation shall  have  power  to  do  so,  by  giving  thirty  days'  notice 
of  his  or  her  intention  to  withdraw,  when  he  or  she  shall  be 
entitled  to  receive  the  amount  paid  in  by  him  or  her,  and 
such  interest  thereon  or  such  proportion  of  the  profits  there- 
on as  the  by-laws  may  determine,  less  all  fines  and  other 
charges :  Provided,  that  at  no  time  shall  more  than  one  half 
of  the  funds  of  the  treasury  of  the  corporation  be  applicable 
to  the  demands  of  withdrawing  stockholders  without  the  con- 
sent of  the  Board  of  Directors,  and  that  no  stockholder  shall 
be  entitled  to  withdraw  whose  stock  is  held  in  pledge  for 

'§5. 


§  20.]  STATUTORY    PROVISIONS   OF   THE    STATES.  21 

security.  Upon  the  death  of  a  stockholder  his  or  her  legal 
representatives  shall  be  entitled  to  receive  the  full  amount 
paid  in  by  him  or  her  on  the  shares  not  borrowed  upon  or 
pledged  to  the  association  as  collateral  security,  and  legal  in- 
terest thereon,  first  deducting  all  charges  that  may  be  due  on 
the  stock ;  but  no  fines  shall  be  charged  to  a  deceased  mem- 
ber's account  from  and  after  his  or  her  decease,  unless  the 
legal  representatives  of  such  decedent  assumes  the  future  pay- 
ment of  the  dues  on  the  stock.1 

(g)  Married  women  may  become  subscribers  to  the  capital 
stock  of  such  association,  and  hold,  control  and  transfer  their 
stock  in  all  respects  as  fernmes-sole,  and  their  stock  shall  not 
be  subject  to  the  control  of,  or  liable  for  the  debts  of  their 
husbands.  Minors  may  become  subscribers  to  and  owners  of 
the  stock  of  such  associations  by  guardian  or  trustee,  and  such 
guardian  or  trustee  may  withdraw  the  stock  of  such  minor  as 
provided  in  section  six  of  this  act :  Provided,  however,  that 
such  guardian  or  trustee  shall  give  bonds  to  the  Probate 
Court  in  double  the  amount  of  the  withdrawal  value  of  such 
stock,  for  the  use  of  such  minor  on  his  or  her  becoming  of 
age ;  but  it  is  hereby  provided,  that  no  person  as  owner  or 
legal  representative  of  the  stock  of  such  association  shall  by 
himself  or  by  proxy,  vote  at  any  election,  when  the  stock- 
holders are  called  upon  to  vote,  on  more  than  forty  shares  of 
stock.4 

(K)  The  Board  of  Directors  shall  hold  such  stated  meet- 
ings, not  less  frequently  than  one  each  month,  as  may  be  pro- 
vided by  the  by-laws,  at  -which  the  money  in  the  treasury,  if 
one  hundred  dollars  or  more,  shall  be  offered  for  loan  in  open 
meeting;  and  the  stockholder  who  shall  bid  the  highest 
premium  for  the  preference  or  priority  of  loan,  shall  be  en- 
titled to  receive  a  loan  of  one  hundred  dollars,  less  the  pre- 
mium bid,  for  each  share  of  stock  held  by  Niid  stockholder  : 
Provided,  that  no  loan  shall  be  made  by  said  corporation  ex- 
cept to  its  own  members,  nor  in  any  sum  in  excess  of  the 
amount  of  stock  held  by  such  members  borrowing:  Ami  j>i'o- 
vided,  that  such  stockholder  may  borrow  such  fractional  part 
of  one  hundred  dollars  as  the  by-laws  may  provide.  Good 
and  ample  real  estate  security  unincumbered  except  by  prior 
1  §  6.  •  §  7. 


22  THE  LAW   OF  BUILDING   ASSOCIATIONS.          [CH.  II. 

loans  of  such  association  shall  be  given  by  the  borrower,  to 
secure  the  repayment  of  the  loan :  Provided,  however,  that 
the  stock  of  such  association  may  be  received  as  security,  to 
the  amount  of  the  withdrawal  value  of  such  stock.1 

(i)  In  case  the  borrower  shall  neglect  to  offer  security,  or 
shall  offer  security  that  is  not  approved  by  the  Board  of  Direc- 
tors by  such  time  as  the  by-laws  may  prescribe,  he  or  she  shall 
be  charged  with  one  month's  interest,  together  with  any  ex- 
penses incurred,  and  the  money  may  be  resold  at  the  next 
stated  meeting.  In  case  of  nonpayment  of  instalments  or  in- 
terest and  fine  by  borrowing  stockholders  for  the  space  of  six 
months,  payment  of  principal  and  interest  and  fines,  without 
deducting  the  premium  paid  or  the  interest  thereon,  may  be 
enforced  by  proceedings  against  their  securities  according  to 
law,  upon  the  order  of  the  Board  of  Directors.* 

(j)  A  borrower  may  repay  a  loan  at  any  time,  and  in  the 
event  of  the  repayment  thereof  before  the  expiration  of  the 
eighth  year  after  the  organization  of  the  association,  or  the 
date  of  issue  of  the  series  of  stock  in  such  association  on  which 
the  loan  may  have  been  made,  there  shall  be  refunded  to  such 
borrower  one  eighth  of  the  premium  paid  for  every  year  of 
the  said  eight  years  then  unexpired.* 

(k)  Corporations  organized  under  this  act  being  of  the 
nature  of  co-operative  associations,  therefore  no  premiums, 
fines  nor  interest  on  such  premiums  that  may  accrue  to  the 
said  corporation  according  to  the  provisions  of  this  act,  shall 
be  deemed  usurious,  and  the  same  may  be  collected  as  other 
debts  of  like  amount  may  be  collected  by  law  in  this  State.4 

(I)  No  corporation  or  association  created  under  this  act 
shall  cease  or  expire  from  neglect  on  the  part  of  the  corpora 
tion  to  elect  officers  at  the  time  mentioned  in  their  charter 
and  by-laws,  and  all  officers  elected  by  such  corporation  shall 
hold  their  offices  until  their  successors  are  duly  elected.* 

(m)  Any  loan  or  building  association  incorporated  by  or 
under  this  act  is  hereby  authorized  and  empowered  to  pur- 
chase at  any  sheriff's  or  other  judicial  sale,  or  at  any  other 
sale,  public  or  private,  any  real  estate  upon  which  such  associa- 
tion may  have  or  hold  any  mortgage,  lien,  or  other  incum- 
brance,  or  in  which  said  association  may  ha?e  an  interest,  and 
'§8.  »§9.  »§ltt  «§11.  '§12. 


21.] 


STATUTORY    PROVISIONS   OF  THE   STATES. 


23 


the  real  estate  so  purchased  to  sell,  convey,  lease,  or  mortgage 
at  pleasure  to  any  person  or  persons  whatever.1 

(n)  Any  loan  or  building  association  incorporated  under 
this  act  or  any  prior  act,  may  extend  the  duration  of  time  for 
which  such  association  was  organized  by  a  vote  of  two  thirds 
of  the  capital  stock  of  such  association  at  any  annual  meeting 
of  the  stockholders  of  such  association,  thereupon  the  Board 
of  Directors  shall  transmit  a  copy  of  the  proceedings  of  such 
annual  meeting,  duly  attested,  to  the  Secretary  of  State,  who 
shall  issue  his  certificate  as  provided  in  section  three  of  this 
act,  certifying  to  the  extension  of  time  of  duration  of  such 
association,  and  the  same  shall  be  recorded  as  provided  in  said 
section  three  of  this  act.  And  any  association  incorporated 
under  any  prior  act,  and  extending  the  duration  of  the  time 
for  which  it  was  incorporated,  in  the  manner  herein  provided, 
shall  be  deemed  incorporated,  under  and  be  vested  with  all  of 
the  powers  given  in  this  act,  the  same  as  if  such  association 
had  been  originally  incorporated  under  it." 

§  21.  Indiana.9  (a)  Any  number  of  persons  not  less  than  ten 


'§13. 

*§  14. 

3  Act  Mar.  11,  1875,  Acts  of  In- 
diana, Reg,  and  Spec.  Sess.,  1875, 
pp.  17-21;  Act  Mar.  13,  1877,  Acts 
of  Indiana,  Spec.  Sess.,  1877,  ch. 
vii.  pp.  25-27;  Act  April  16,  1881, 
Acts  of  Indiana,  1881,  ch.  xv.  p. 
90,  amending  Act  Mar.  3,  1877, 
Acts  1877,  p.  7.  See  also  Act  Mar. 
24,  1879,  Acts  1879,  ch.  x.  pp.  80- 
81,  legalizing  existing  associations 
defectively  organized.  Decisions: 
Stein  and  wife  ». Indianapolis  Build- 
ing Loan  Fund  and  Saving  Associ- 
ation, 18  Ind.  237  (constitutionality 
of  Act  Mar.  5, 1857,  repealed  by  Act 
of  1875. — Usury,  voluntary  associ- 
ation after  incorporation  may  sue  in 
corporate  name  on  securities  re- 
ceived before  in  corporation);  Nel- 
son v.  Blakey,  54  Id.  29  (requisites 
of  incorporation — "duplicate"  re- 
quired by  Act  of  Mar.  11,  1867,  to 
be  filed  with  Secretary  of  State,  is 


not  a  certified  copy,  but  an  original 
instrument,  like  that  recorded  in  the 
Recorder's  office,  executed  with  the 
same  formalities  and  by  the  same 
persons, — suit  to  recover  for  stock 
subscribed  must  show  by  proof  that 
certificate  of  incorporation  was  filed 
with  recorder  of  proper  county,  and 
duplicate  with  Secretary  of  State); 
McLaughlin,  et  al.,  v.  The  Citizens' 
Building  Loan  and  Saving  Associ- 
ation, 62  Id.  264  (constitutionality 
of  Act  of  1875,— loans,— premium, — 
plea  of  nul  tiel  corporation);  Shaf- 
frey  v.  The  Workingmcn's  Savings, 
Loan  and  Building  Association,  64 
Id.  600  (follows  preceding  case); 
Poock  et  al.  v.  The  Lafayette  Build- 
ing Association,  71  Id.  357  (lending 
money  ultra  tires,  —estoppel, — Act 
Mar.  13, 1877);  Ginz  c.Stumph  et  al., 
73  Id.  209  (assignment  of  stock,  al- 
though absolute  on  its  face,  may  be 
shown  to  have  been  as  collateral 
merely). 


34  THE  LAW  OF   BUILDING   ASSOCIATIONS.          [CH.  11. 

may  associate  themselves  together  for  the  purpose  of  organ  ix- 
ing  building,  loan  fund  and  savings  associations,  and  for  that 
purpose  they  shall  make,  sign  and  acknowledge,  before  some 
officer  capable  of  taking  acknowledgments  of  deeds,  an  article 
of  association  in  writing,  which  shall  state  the  corporate  mimo 
adopted  by  the  company,  the  object  of  its  formation,  the 
amount  of  capital  stock,  the  number  of  the  directors  and  their 
names  who  shall  manage  the  affairs  of  the  company  for  the 
first  year,  and  the  name  of  the  town  or  county  in  which  its 
operations  are  to  be  carried  on,  and  cause  the  said  articles  to 
be  recorded  in  the  Recorder's  office  of  the  county  where  the 
business  is  to  be  carried  on,  and  a  duplicate  thereof  in  the 
office  of  the  Secretary  of  State.1 

(b)  When  the  articles  of  association  shall  have  been  filed  and 
recorded  as  aforesaid,  a  certified  copy  thereof  shall  be  evidence 
of  the  things  therein  contained,  and  the  persons  who  shall 
have  filed  and  acknowledged  the  same,  and  their  successors, 
shall  be  a  body  corporate  and  politic,  and  in  their  corporate 
name  may  contract,  sue  and  be  sued,  and  may  hold  and  con- 
vey real  estate  and  personal  property  as  hereinafter  provided, 
and  the  business  of  the  association  shall  be  managed  by  a 
board  of  directors,  who  shall  be  stockholders  of  the  associa- 
tion, and  who  shall  be  selected  by  the  stockholders  a£  the  by- 
laws of  the  association  may  provide.* 

(c)  The  company  shall  have  the  power  and  franchise  of 
loaning  or  advancing  to  the  stockholders  thereof  the  moneys 
accumulated  from  time  to  time,  and  the  power  and  right  to 
secure  the  repayment  of  such  moneys  and  the  performance  of 
the  other  conditions  upon  which  the  loans  are  to  be  made  by 
note  and  mortgage,  or  upon  note  secured  by  stock  of  the 
association,  or  personal  security,  as  well  as  the  power  and 
right  to  purchase  or  erect  houses,  and  to  sell,  convey,  lease,  or 
mortgage  the  same  at  their  pleasure  to  their  stockholders  or 
others,  for  the  benefit  of  their  stockholders  in  such  manner ; 
also,  that  the  premiums  taken  by  the  said  association  for  the 
preference  or  priority  of  such  loans,  shall  not  be  deemed  usuri- 
ous ;  and  also  that  in  case  of  nonpayment  of  instalments  or 
interest  by  borrowing  stockholders,  for  three  months,  payment 
of  principal,  premium  and  interest,  without  deducting  the 

1  Act  Mar.  11, 1875,  Sec.  1.  *  Act  Mar.  11,  1875,  Sec.  2. 


§  21.]  STATUTORY    PROVISIONS   OF  THE   STATES.  25 

premium  paid  or  interest  thereon,  may  be  enforced  by  pro- 
ceedings on  their  securities  according  to  law.1 

(d)  The  capital  stock  of  any  corporation  created  for  such 
purposes,  by  virtue  of  this  act,  shall  at  no  time  consist  in  the 
aggregate  of  more  than  live  hundred  thousand  dollars,  to  be 
divided  into  shares  of  such  denomination,  not  exceeding 
five  hundred  dollars  each,  and  in  such  number  as  the  by- 
laws of  the  association  may  provide :  Provided,  that  the 
capital  stock  may  be  issued  in  series,  but  no  such  series  shall 
at  any  time  exceed  in  the  aggregate  one  hundred  thousand 
dollars ;  the  instalments  on  which  stock  are  to  be  paid,  at 
such  time  and  place  as  the  by-laws  may  provide,  but  no  peri- 
odical payment  of  such  instalment  to  be  made  exceeding  fifty 
cents  per  week  on  each  one  hundred  dollars  of  stock,  and  said 
stock  may  be  paid  off  and  retired,  as  the  by-laws  may  pro- 
vide ;  and  every  share  of  stock  shall  be  subject  to  a  lien  for 
the  payment  of  unpaid  instalments  and  other  charges  incurred 
thereon,  under  the  provisions  of  the  Constitution  and  by- 
laws, and  the  by-laws  may  prescribe  the  form  and  manner  of 
enforcing  such  lien,  and,  in  lieu  of  the  shares  withdrawn  or 
forfeited,  the  stock  may  be  issued  in  one  or  in  successive  se- 
ries, in  such  amounts  as  the  board  of  directors  may  deter- 
mine, and  any  stockholder  wishing  to  withdraw  from  said 
corporation  shall  have  power  to  do  so  by  giving  three  months' 
notice  to  the  board  of  directors  of  his  or  her  intention  to 
withdraw,  when  he  or  she  shall  be  entitled  to  receive  the 
amount  paid  in  by  him  or  her,  less  all  fines  and  other  charges, 
but  after  the  expiration  of  one  year  from  the  issuing  of  such 
series  such  stockholder  shall  be  entitled,  in  addition  thereto, 
to  legal  interest  thereon  :  Provided,  that  at  no  time  shall 
more  than  one  half  of  the  funds  in  the  treasury  be  applicable 
to  the  demands  of  withdrawing  stockholders,  without  the 
consent  of  the  board  of  directors,  and  that  no  stockholder 
shall  be  entitled  to  withdraw  whose  stock  is  held  in  pledge 

1  Act  Mar.  13,  1877,  Sec.  1. — This  taking  what  act  was  intended  to  be 

act  misrecites  Act  Mar.  11,  1875,  amended,  the  whole  hill  being  cor- 

which  it  amends,  citing  it  as  Act  rectly  set  out,  and  that  it  would  not 

Mar.  11, 1873.   In  Poock  et  al.  v.  The  be  justifiable  to  annul  an  act  on 

LaFayette  Building  Association,  71  so  narrow  a  ground.     The  point  is, 

Ind.  357,  the  court   advert  to   that  however,    perhaps    not    absolutely 

fact,  but  say  that  there  is  no  mis-  decided  by  the  court. 


26  THE   LAW   OF  BUILDING   ASSOCIATIONS.          [CH.  II. 

for  security.  Upon  the  death  of  a  stockholder  his  or  her 
legal  representative  shall  be  entitled  to  receive  the  full 
amount  paid  in  by  him  or  her,  and  legal  interest  thereon, 
first  deducting  all  charges  that  may  be  due  on  the  stock.  No 
tines  shall  be  charged  to  a  deceased  member's  account  from 
and  after  his  or  her  decease,  unless  the  legal  representatives 
of  such  decedent  assume  the  future  payments  on  the  stock.1 

(e)  The  number,  functions,  qualilications  and  compensa- 
tion of  the  officers  of  any  corporation,  their  terms  of  office, 
the  times  of  their  elections,  as  well  as  the  qualilications  of 
electors,  and  the  votes  and  manner  of  voting,  and  the  period- 
ical meetings  of  said  corporation,  shall  be  determined  by  the 
by-laws  of  the  association,  when  not  provided  by  this  act.* 

(f)  Said  directors  shall  hold  stated  meetings,  at  which 
the  money  in  the  treasury,  if  over  the  amount  fixed  in  the 
constitution  or  by-laws  as  the  full  value  of  a  share,  shall  be 
offered  for  loan  in  open  meeting.     The  by-laws  of  the  asso- 
ciation shall  prescribe  the  manner  of  awarding  such  loan  or 
loans  to  its  members,  the  rate  of  interest  to  be  paid  therefor, 
not  exceeding  ten  per  cent,  per  auiium,  payable  monthly  or 
quarterly  in  advance ;  or  said  association  may  provide  in  its 
by-laws  that  such  loans  shall  be  made  to  the  members  of  said 
association  who  shall  bid  the  highest  premium  for  the  prefer- 
ence or  priority  of  loan,  and  who  shall  be  entitled  to  receive 
a  loan  of  not  more  than  the  amount  fixed  by  the  constitution 
and  by-laws  as  the  full  value  of  a  share  for  each  share  of 
stock  held  by  such  person.     The  said  premium  shall  be  bid 
as  of  so  much  per  share  :  Provided,  that  a  stockholder  may 
borrow  such  fractional  part  of  the  amount  fixed  by  the  con- 
stitution and  by-laws  as  the  full  value  of  a  share,  as  the  by- 
laws may  provide.     Good  and  ample  real  estate  or  personal 
security,  as  prescribed  by  the  by-laws  of  the   corporation, 
shall  be  given  by  the  borrower  to  secure  the  repayment  of  the 
loan,  with  interest,  and  also  for  the  payment  of  the  dues,  fines 
and  assessments  that  may  be  assessed  on  his  share  of  stock 
upon  which  the  loan  is  made.     In  case  the  borrower  shall 
neglect  to  offer  security,  or  shall  offer  security  that  is  not  ap- 
proved by  the  board  of  directors,  by  such  time  as  the  by-laws 
may  prescribe,  he  or  she  shall  be  charged  with  legal  interest 

1  Act  Mar.  18, 1877,  Sec.  2.  •  Act  Mar.  11,  1875,  Sec.  5. 


§  21.]  STATUTORY    PROVISIONS   OF   THE   STATES.  27 

as  prescribed  in  the  by-laws,  together  with  any  expense  in- 
curred and  the  loss  in  premium,  if  any,  on  a  re-sale,  and  the 
money  may  be  re-sold  at  the  next  stated  meeting.  In  case  of 
nonpayment  of  instalments  by  borrowing  stockholders,  for 
the  space  of  three  mouths,  payments  of  principal  and  inter- 
est and  tines,  without  deducting  the  premiums  paid  or  inter- 
est thereon,  may  be  enforced  by  proceedings  on  their  security 
according  to  law.1 

(g)  A  borrower  who  is  not  in  arrears  for  dues,  interest, 
fines  or  assessments,  may  repay  his  loan  at  any  time,  and  may 
at  the  same  time  withdraw  from  the  association  ;  and  for  that 
purpose  he  shall  pay  to  the  association,  or  the  officer  thereof 
authorized  to  receive  payment  of  dues  or  interest,  the  full 
face  amount  of  the  principal  of  his  loan,  less  the  amount  by 
him  paid  to  said  association,  as  dues  and  assessments  on  his 
stock,  with  interest  on  such  payments  from  the  time  they 
were  made  at  eight  per  cent,  per  annum,  and  less  so  much  of 
the  premium  or  discount  paid  by  him  on  his  loan  for  the  pri- 
ority thereof  as  shall  bear  the  same  proportion  to  the  whole 
premiums  by  him  paid,  which  the  unexpired  time  for  which 
the  loan  was  made  bears  to  the  whole  time  for  which  the  loan 
was  made ;  and,  on  such  payments  being  made,  the  stock  held 
by  such  person  shall  be  delivered  up  to  said  association  and 
cancelled,  and  no  new  stock  shall  be  issued  therefor ;  and  the 
officer  of  such  association  to  whom  such  payment  is  made 
shall  also  immediately  cancel  and  deliver  up  to  such  borrower 
his  note  and  mortgage,  or  other  evidence  of  said  loan,  and 
shall  enter  on  the  record  of  such  mortgage  a  full  satisfaction 
thereof,  which  entry  shall  be  a  complete  satisfaction  of  such 
mortgage." 

(A)  No  premiums,  fines  or  interest  on  such  premiums  that 
may  accrue  to  the  said  corporation,  according  to  the  provi- 
sions of  this  act,  shall  be  deemed  usurious,  and  the  same  may 
be  collected  as  debts  of  like  amount  are  now  by  law  collected 
in  this  State." 

(*)  No  corporation  or  association  created  under  this  act 
shall  cease  or  expire  from  neglect  on  the  part  of  the  corpora- 
tion to  elect  officers  at  the  time  mentioned  in  their  by-laws, 
1  Act.  Mar.  3,  1877,  Sec.  3.  *  Act  Apr.  16,  1881. 

»  Act  Mar.  11,  1875,  sec.  8. 


28  THE  LAW  OF  BUILDING   ASSOCIATIONS.         [CH.  II. 

and  all  officers  elected  by  such  corporation  shall  hold  their 
offices  until  their  successors  are  duly  elected.1 

(j)  Any  building,  loan  fund,  or  savings  association,  in- 
corporated under  or  by  this  act,  and  those  incorporated  prior 
thereto,  are  hereby  authorized  and  empowered  to  purchase  at 
any  sheriff's  or  other  judicial  sale,  or  at  any  other  sale,  pub- 
lic or  private,  any  real  estate  upon  which  such  association 
may  have  or  hold  any  mortgage,  judgment,  lien  or  other  in- 
cumbrance,  or  ground  rent,  or  in  which  said  association  may 
have  an  interest,  and  the  real  estate  so  purchased,  or  any 
other,  that  such  association  may  hold  or  be  entitled  to  at  the 
passage  of  this  act,  to  sell,  convey,  lease  or  mortgage  at  pleas- 
ure to  any  person  or  persons  whatever,  and  all  sales  of  real 
estate  heretofore  made,  by  such  association,  to  any  person  or 
persons,  are  hereby  confirmed  and  made  valid." 

(&)  All  such  corporations  shall  have  full  power  to  pur- 
chase lands,  and  to  sell  and  convey  the  same,  or  any  part 
thereof,  to  their  stockholders  or  others,  in  fee  simple,  with  or 
without  the  reservation  of  ground  rents;  but  the  quantity  of 
land  purchased  by  any  one  of  said  associations,  hereinafter  in- 
corporated, shall  not,  in  the  whole,  exceed  fifty  acres,  and  in 
all  cases  the  land  shall  be  disposed  of  within  ten  years  from 
purchase  of  same.  That  all  building,  loan  fund  and  sav- 
ings associations  are  hereby  authorized  to  make  sale  of,  and 
extinguish  to  any  person  or  persons  the  ground  rents  created 
as  aforesaid.* 

(I)  The  shares  of  capital  stock  in  any  building,  loan  fund 
or  saving  association,  organized  under  the  previous  laws  of  this 
State,  and  any  such  association  that  may  hereafter  be  organ- 
ized under  this  act,  shall  be  listed  by  the  president  thereof  in 
the  county,  township,  city  or  town  where  such  association  is 
located,  in  conformity  to  the  provisions  of  section  59  of  an  act 
entitled  "  An  act  for  the  uniform  assessment  of  property  and 
for  the  collection  and  return  of  taxes  thereon,"  approved  De- 

1  §  9.  and   allowing  such  as  have  com- 

*  §  10.  menced  proceedings  under  the  re- 

8  §  11.  The  following  section  of  pealed  acts,  to  continue  them  under 

the  Act  (§  12)  repeals  the  Acts  of  the  Act  of  1875.     See  McLaughlin 

Mar.  5,  1857,  and  Mar.  7,  1873,  and  et  al.  v.  The  Citizens'  Building  Loan 

all  other  conflicting  acts,  reserving  and    Saving  Association,   62  lud. 

all  rights  to  existing  corporations,  204 


^  22.]  STATUTORY   PROVISIONS   OF  THE  STATES.  29 

cember  21,  1872,  and  shall  be  taxed  at  the  same  rate  as  other 
personal  property,  and  shall  be  assessed  with  regard  to  the 
value  of  its  stock  on  the  first  day  of  April  of  the  current  year, 
and  this  act  shall  apply  to  the  taxes  for  the  year  1874,  which 
taxes  shall  be  paid  by  the  association.1 

(m)  All  such  associations  shall  have  power  to  assess,  in 
addition  to  the  amount  provided  in  section  4  of  this  act,  the 
sum  of  twenty-five  cents  per  month,  upon  each  share  of  stock, 
for  the  purpose  of  defraying  the  expenses  of  the  association, 
which  sum  to  be  payable  with  the  regular  instalment,  and 
shall  also  have  the  power  to  provide  in  their  by-laws  for  the 
assessment  and  collection  of  fines  and  penalties  from  delin- 
quent stockholders  for  nonpayment  of  dues,  interest,  instal- 
ments and  assessments ;  also  to  provide  in  their  by-laws  for 
the  forfeiture  of  all  the  rights  and  immunities  in  the  associa- 
tion of  such  delinquent  members,  after  a  default  of  three 
months  to  pay  the  dues,  interest,  instalment,  assessment  and 
fines,  and  also  provide,  in  case  a  borrower  of  money  from  such 
association  shall  fail  and  neglect  to  pay  his  dues,  fines,  assess- 
ments, interest  and  instalments  for  a  period  of  three  months 
from  the  time  the  same  shall  become  due  and  payable,  such 
failure  and  neglect  shall  work  a  forfeiture  of  all  his  rights  and 
immunities  as  a  member  of  said  association,  and  the  whole 
sum  loaned  to  him  by  said  association  shall  become  immedi- 
ately due  and  payable,  and  may  be  collected,  together  with 
all  such  fines,  dues,  interest  and  instalments,  by  law.4 

§  22.  Iowa.3  (a)  Any  number  of  persons,  not  less  than 
five,  may  associate  themselves,  and  become  incorporated  as 
provided  in  chapter  one  of  this  title,  for  the  purpose  of  rais- 
ing moneys,  to  be  loaned  to  the  members  of  the  corporation, 
and  to  other  persons,  and  for  use  in  buying  lots  and  houses, 
or  in  building  or  repairing  houses,  or  other  purposes. 

(J)  Such  corporation  shall  be  authorized  and  empowered 

1  §  13.  Hawkeye  Benefit,  &c. ,  Association 

*  §  14.  v.  Blackburn,  48  Iowa,  885  (with- 

8  Code    of  Iowa,  1873,  £§  1184-  drawal,— liability  for  share  of  losses, 

1187;  Act  April  6,  1872,  Laws  of  — interest  on  premium);  Burlington 

Iowa,  1872,  C.  30,  pp.  35  seq. ;  Act  Mutual  Loan  Association  ».  Heider, 

April  23,  1872,  Laws  1872,  C.  101,  et  al.,  55  Id.  424  (S.  P.,— usury  a 

p.  106;   Act  Mar.  17,  1876,    Laws  personal  defence). 
1876,   C.   163,   p.   165.     Decisions: 


30  THE  LAW  OF  BUILDING  ASSOCIATIONS.          [CH-  n- 

to  levy,  assess  and  collect  from  its  members  such  sums  of 
money,  by  rates  of  stated  dues,  fines,  interest  on  loans  ad- 
vanced, and  pivniiunis  bid  by  members  for  the  right  of  pre- 
cedence in  taking  loans,  as  the  corporation  by  its  by-laws  shall 
adopt ;  also  to  acquire,  hold,  encumber,  and  convey  all  such 
real  estate  and  personal  property  as  may  be  legitimately 
pledged  to  it  on  such  loans,  or  may  otherwise  be  transferred 
to  it  in  due  course  of  its  business,  and  the  dues,  fines  and  pre- 
miums so  paid  by  members,  in  addition  to  the  legal  rate  of  in- 
terest on  loans  taken  by  them,  shall  not  be  construed  to  make 
the  loans  so  taken  usurious,  but  no  person  shall  hold  more 
than  twenty  shares  in  any  such  association.1 

(c)  When  mutual  loan  societies,  or  other  associations  here- 
tofore organized  under  the  laws  of  this  State,  with  objects 
similar  to  those  contemplated  in  the  preceding  sections,  and 
permitting  not  more  than  twenty a  shares  of  their  stock  to  be 
owned  by  any  one  member,  have  loaned,  or  shall  hereafter 
loan,  their  capital  or  funds,  or  any  part  thereof,  to  their  mem- 
bers, and  have  taken,  or  shall  take,  notes  or  obligations  there- 
for, secured  by  mortgages  or  otherwise,  in  accordance  with  the 
terms  of  their  articles  of  incorporation  and    by-laws,  such 
notes,  obligations  and  securities  shall  not  be  construed  or  held 
to  be  usurious  by  reason  of  any  dues,  fines  or  premiums  for 
the  right  of  preference  in  taking  such  loans  paid  in  addition 
to  the  legal  rate  of  interest,  but  the  same  shall  be  valid  and 
binding  in  all  respects,  the  payment  of  such  dues,  fines  or 
premiums,  in  addition  to  a  rate  of  interest  not  exceeding  ten 
per  cent,  per  annum,  payable  annually,  or  at  any  less  period, 
notwithstanding." 

(d)  So  much  of  the  earnings  of  said  corporation  as  ma  v 
be  necessary,  not  exceeding  ten  per  cent,  per  annum,  may  be 
set  apart  to  defray  the  current  expenses  of  said  association, 
and  for  the  purchase  of  such  real  estate  as  may  be  necessary 
for  the  convenient  transaction  of  its  business,  and  the  residue 
of  said  earnings  shall  be  transferred  to  the  credit  of  the  share- 
holders, and  when  said  shares  are  fully  paid,  then  to  be  paid 
ratably  to  the  shareholders.4 

1  Code,  §  1184  •  Code,  §  1186. 

8  Act  Apr.  38,  1872.  Laws  1872,         *  Code,  §  1187. 
C.  101,  p.  106. 


g  23.]  STATUTORY   PBOVISIOtfS   OF  THE   STATES.  31 

(c)  The  shares  of  stock  of  mutual  loan  and  building  associ- 
ations shall  be  assessed  at  their  cash  value,  but  only  the  un- 
redeemed shares  of  such  stock  shall  be  taxed,  and  such  unre- 
deemed shares  shall  be  listed  to  the  individual  owners  thereof.1 

§  23.  Kansas.2  (#)  Private  corporations  may  be  created 
by  the  voluntary  association  of  five  or  more  persons,  for  the 
purpose  and  in  the  manner  mentioned  in  the  following  sec- 
tions of  this  article  and  amendments  thereto.  Every  member 
or  stockholder  in  said  corporation  shall  vote  in  person  or  by 
proxy.8 

(&)  A  charter  must  be  prepared  setting  forth  :  First,  the 
name  of  the  corporation.  Second,  the  purpose  for  which  it  is 
formed.  Third,  the  place  or  places,  where  its  business  is  to 
be  transacted.  Fourth,  the  term  for  which  it  is  to  exist. 
Fifth,  the  number  of  its  directors  or  trustees,  and  the  names 
and  residences  of  those  who  are  appointed  for  the  first  year, 
and  Sixth,  the  amount  of  its  capital  stock,  if  any,  and  the 
number  of  shares  into  which  it  is  divided.4 

(c)  That  premiums  bid  for  priority  of  loan  in  building 
and  saving  or  trust  associations,  organized  under  the  corpora- 
tion laws  of  this  State,  by  the  members  of  such  associations, 
shall  not  be  deemed  as  usury,  or  subject  to  the  provisions  of 
sections  3  and  4  of  an  act  regulating  the  interest  of  money, 
Chapter  51  of  General  Statutes  of  1868,  and  all  such  premi- 
ums incorporated  in  the  notes  given  by  the  members  ot  the 
associations,  and  all  the  fines  assessed  against  its  members  in 
accordance  with  the  by-laws  of  such  associations,  may  be  col- 
leted  by  civil  action,  before  any  Court  having  jurisdiction.6 

'Act  Mar.  17,  1876,  Laws  1876,  Paola,  22  Kan.  624  (acts  prior  to  Mar. 

C.  163,  p.  165.  20,1375, —loans,— usury,— pleaof  nul 

2  Com  piled  Laws  of  Kansas,  1879;  tiel  corporation,— marshalling  of  as- 

pl.  1064,  1068,  Ch.  23,  Art.  2,  §§  5,  sets),  Salina.  Building,  Saving  and 

6;  pi.  1193-1203,  Ch.  23,  Art.  17,  Trust  Association*.  Nelson etal.,  22 

§§  134-143;  pi.  5795,  Ch.  107,  Art.  6,  Kan.  751  (Act  of  1869,  and  see  pre- 

§  23.  Decisions:  St.  Joseph  and  Kan-  ceding  case). 

BUS  Loan  and  Building  Association  *  Pi.  1064,  Ch.  23,  Art.  2,  §  5;  L. 

T.  Thomson  et  al.,  19  Kan.  321  (loans,  1872,  Ch.  105,  §  1,  Mar.  19,  1872. 

— usury);   Ilekeinkaemper  et  al.  «.  *  PI.  1068,  §6. 

The  German  Building  and  Saving  •  PI.  1193,  Ch.  23,  Art.  17,  §  134, 

Association,  22  Kan.  549  (premature  sec.  1;  L.  1869.  Ch.  5,  §  1,  Mar  11, 

dissolution) ;  Massey  v.  The  Citizens'  1869.  The  Act  of  1869  is  neither  void 

Building  and  Saving  Association  of  nor  repealed,  but  applies  in  all  cases 


32  THE  LAW   OF  BUILDING   ASSOCIATIONS.          [CU.  II. 

(d)  All   corporations  heretofore  incorporated  under  the 
laws  of  the  State  of  Kansas,  for  the  purpose  of  accumulating 
and  loaning  funds  to  members,  or  that  have  been  so  accumu- 
lating and  loaning,  are  hereby  recognized  and  confirmed  as 
legal  and  valid  corporations  from  the  date  of  their  incorpora- 
tion, or  the  time  they  commenced  to  accumulate  and  loan  to 
mem  be  re,  and  all  contracts  made  between  them  and  their 
members ;  all  loans  made,  at  whatsoever  premium,  discount  or 
interest,  and  all  securities  taken  for  such  loans,  are.  hereby  de- 
clared legal,  valid,  and  binding  on  all  parties  concerned  or  af- 
fected thereby,  or  having  notice  thereof.1 

(e)  All  associations  organized  under  the  general  corpora- 
tion laws  of  this  State  for  the  purpose  of  accumulation  and 
loan  of  funds,  the  erection  of  buildings,  and  the  purchase  and 
sale  of  real  estate,  for  the  mutual  benefit  of  their  members,  shall 
be  permitted  to  conduct  such  business  with  its  members  ex- 
clusively, and  may  receive  payment  for  its  shares  of  stock 
in  such  manner,  and  upon  such  terms  as  are  prescribed  by  the 
by-laws,  may  receive  money  on  loan  or  on  deposit,  and  may 
lend  money  to  its  members  on  the  security  of  United  States 
bonds,  or  bonds  of  the  State  of  Kansas,  the  stock  of  such  asso- 
ciation or  real  estate,  which  loans  shall  be  repaid  in  such  stated 
periodical  instalments  as  are  prescribed  in  the  by-laws,  and  all 
contracts  between  such  associations  and  their  members  shall 
be  deemed  valid  and  binding  in  law :  Provided,  that  the  sum 
of  all  the  repayments  agreed  to  be  made  by  the  borrower,  for 
the  whole  time  for  which  he  receives  his  loan,  shall  not  exceed 
the  actual  amount  of  money  borrowed,  with  interest  thereon 
at  twelve  per  cent,  per  annum  for  the  whole  time  for  which  it 
was  so  borrowed." 

(f)  Whenever,  by  reason  of  default  in  payment  of  dues 
or  loans  by  members  of  such  association,  it  becomes  necessary, 
according  to  the  by-laws,  to  bring  suit  on  any  mortgage  for  the 
purpose  of  collecting  such  loans  or  dues,  no  greater  sum  shall  be 

where  loans  were  made  in  accord-  •  PI.  1194,  §  135,  sec.  1;  L.  1870, 

ance  with  its  provisions  and  prior  to  Ch.  43,  §  1 ,  Mar.  10,  1870. 

Mar.  20,  1875,  when  Ch.  65,  Laws  §  136,  sec.  2,  repealed;  L.  1875, 

1875,  took  effect.     Salina  Building,  Ch.  65.  §  4;  L.  1876,  Ch.  34,  §  15* 

Saving   and    Trust  Association  «.  (1195). 

Nelson  et  al.,  22  Kan.  751.  »  PI.  1196,  §  137.  sec.  1. 


§  23.]  STATUTORY   PROVISIONS   OF  THE  STATES.  33 

recovered,  than  that  actually  due  at  the  time  of  judgment,  and 
the  amount  so  due  may  be  ascertained  by  adding  to  the  sum 
of  arrears  the  present  value  of  all  future  instalments  dis- 
counted at  the  rates  per  cent,  and  according  to  the  times  and 
periods  of  payment  established  by  the  by-laws,  not  inconsistent 
with  section  one  of  this  act.  And  whenever,  by  the  constitu- 
tion or  by-laws  of  such  association,  loans  shall  be  made,  or  have 
heretofore  been  made,  to  its  members  by  the  share,  for  premi- 
ums, the  amount  for  which  judgment  shall  be  rendered, 
shall  not  be  greater-  than  the  actual  amount  of  money 
loaned,  with  interest  to  time  of  judgment  at  twelve  per 
cent,  per  annum,  and  all  unpaid  fines  lawfully  assessed 
against  the  borrower  for  nonpayment  under  such  by-laws  not 
exceeding  two  per  cent,  per  month,  less  the  amount  paid  in 
on  such  shares,  with  like  interest,  from  the  time  of  said  pay- 
ment or  payments.1 

(g)  Every  such  corporation,  before  commencing  business 
under  its  charter,  shall  tile  a  copy  of  its  by-laws  with  the  Sec- 
retary of  State,  and  shall  likev/ise  so  file  copies  of  all  subse- 
quent changes  of  such  by-laws ;  and  all  such  associations  now 
doing  business  shalT  immediately  file  copies  of  their  by-laws 
with  the  Secretary  of  State,  and  also  all  subsequent  changes 
thereof.  A  majority  of  stockholders  present  at  any  organized 
meeting  may  adopt,  alter  or  change  the  constitution  or  by- 
laws, or  transact  any  other  business.11 

(h)  That  any  building  and  loan  association  organized  un- 
der the  corporation  laws  of  this  State  for  the  purpose  of  ac- 
cumulating and  loaning  funds,  for  the  erection  of  buildings, 
and  the  purchase  and  sale  of  real  estate  for  the  mutual  benefit 
of  its  members,  is  hereby  authorized  and  empowered  to  reor- 
ganize as  a  savings  bank  and  to  do  business  as  such.3 

(*)  That  before  any  such  association  can  reorganize  under 
the  provisions  of  this  act,  there  shall  be  presented  to  its  board 
of  directors  a  petition,  signed  by  two  thirds  of  the  members 
for  such  reorganization.  Whereupon  it  shall  be  the  duty  of 

1  PI.  1197,  §  138,  sec.  2;  L.  1875,  Laws  1870,  and  all  Acts  and  parts  of 

Ch.  65,  §  2,  Mar.  20,  1875.  acts    inconsistent    with  Act    1875 

8  PI.  1197,  §  139,  sec.  3  ;  L.  1875,  (1199). 

Ch.  65,  §  3,  §  139  a,  sec.  4;  L.  1875,  «  PI.  1200,  §  140,  sec.  1 ;  L.  1876. 

Ch.  65,  §  4,  repeals  sec.  2  of  Ch.  43,  Ch.  51,  §  1. 


34  THE    LAW   OF   BUILDING    ASSOCIATIONS.          [CH.  II. 

such  board  of  directors,  within  thirty  days  from  the  time  of 
presenting  tin-  petition,  to  tile  with  the  Secretary  of  State  an 
addition;!  1  charter,  setting  forth  that  they  have  reorganized 
under  this  act,  which  shall  be  acknowledged  and  certified,  as 
provided  by  law  for  obtaining  charters.1 

(J)  That  all  fully  paid-up  permanent  shares  in  such  build- 
ing and  loan  association  shall  be  exchanged  for  paid-up  stock 
to  the  same  amount  in  such  savings  bank  or  reorganized  cor- 
poration, and  all  accumulating  shares  shall  be  exchanged  for 
investment  certificates,  to  be  issued  by  said  bank,  bearing  the 
same  payments  and  penalties,  the  same  rate  of  interest,  the 
same  ratio  of  participation  in  profits,  and  payment  on  with- 
drawal or  at  maturity,  as  attached  to  the  same  by  the  constitu- 
tion and  by-laws  of  such  association  before  its  reorganization." 

(k)  All  contracts  heretofore  made  with  any  such  building, 
loan  or  savings  association,  may  be  enforced  by  action  in 
the  name  of  such  new  or  reorganized  corporation,  and  all  liens, 
causes  of  action,  are  hereby  saved  and  preserved  to  such  cor- 
poration, as  fully  as  if  this  act  had  not  been  passed.8 

(/)  Every  private  bank,  banker,  broker,  building  and  loan 
and  trust  association,  shall  list  and  return  the  average  amount 
of  capital  invested  in  such  business  during  the  year,  ending 
on  the  first  day  of  March  next  preceding  the  time  required 
for  listing  personal  property.  The  average  amount  of  capital 
so  required  to  be  listed,  shall  be  determined  by  the  average 
amount  of  private  capital  or  individual  fund  of  such  bank, 
banker,  broker,  building  or  loan  association,  invested,  used,  or 
subject  to  use  in  such  business,  to  which  shall  be  added  the 
average  amount  of  net  profits  remaining  undivided  at  the  end 
of  each  month  during  the  year.4 

§  2-i.  Maryland. "  (a)  Any  five  or  more  persons,  citizens  of 

1  PI.  1201,  §  141,  sec.  2;  L.  1876,  Tit.  xxiii.  Art.,  40,  p.  810.  In  par- 

Ch.  51,  §  2.  ticular  §§  86-93;  95  (pp.  329-332); 

*  PL  1202,  §  142,  sec.  3;  L.  1876,  Act  April  14,  1880,  Laws,  Ch.  351, 

Ch.  51,  §  3.  p.  509.  Decisions:  Robertson  ».  The 

3  PI.  1203,  §  143,  sec.  4;  L.  1876,  American  Homestead  Association, 
Ch.  51,  §  7.  10  Md.  397  (loans,— usury,— mort 

4  PI.  5795,  Ch.  107,  Art.  6,  §  23;  gage,     equity,—  computation     of 
L.  1876,  Ch.  34,  g  23  as  amended,  L.  amount  due  on  mortgage,— member- 
1879,  Ch.  39,  §  11.  ship);  Franz  v.  Teutonia  Building 

5  Revised  Code  of  Maryland.  1878,  Association  No.  2,  24  Md.  259  (plea 


§24.] 


STATUTORY    PBO VISIONS   01?   THE   STATES. 


35 


the  United  States,  and  a  majority  of  them  citizens  of  this  State, 
who  may  desire  to  form  a  homestead  or  building  associa- 


of  nul  tiel  corporation, — estoppel); 
Oak  Cottage  Building  Association  v. 
Eastman  and  Rodgers,  31  Md.  556 
(voluntary  re-payment) ;  Davis  v. 
West  Saratoga  Building  Union  No. 

3,  32  Md.  285  (power  of  borrowing 
money;  see  also  Canton  National 
Building  Association  v.  Weber,  34 
Md.  669);  Monumental  Building  As- 
sociation No  2  v.  Herman  et  al. ,  33 
Md.  128  (mortgage  by  infant);  Await 
v.  Eutaw  Building  Association  No. 

4,  34  Md.  435  (recovery  of  money  vol- 
untarily paid  usuriously);  Knell  v. 
Green  St.   Building  Association,  34 
Md.  67  (judgment  creditor);  Shan- 
non v.  The  Howard  Mutual  Build- 
ing Association,  36  Md.  383  (fines, — 
mortgage, — dues, — computation  of 
amount  payable  on  mortgage);  Lord 
&  Robinson  v.  Essex  Building  Asso- 
ciation No.  4,  37  Md.  320  (irregular- 
ity of  articles  and  by-laws, — plea  of 
nul  tiel  corporation);  Monumental 
Permanent  Building  and  Land  So- 
ciety v.  Lewin,  38  Md.  445  (fines); 
Lister  v.  Log  Cabin  Building  Associ- 
ation,38  Md.  115  (mortgage,— loan,— 
computation — membership) ;  Walter 
«.  Riehl,  38  Md.  285  (parties  to  bill 
for  foreclosure);  McCahan^.  Colum- 
bian Building  Association,  40  Md. 
226   (construction    of    mortgage — 
membership,— fines,— computation); 
Windsor  &  Applegarth  v.  Baudel,  et 
al. ,  40  Md.  172 ;  14  Am.  L.  R. ,  N.  S. , 
250  (effect  of  premature  dissolution 
on  borrowers);    Maryland   Perma- 
nent Land  and  Building  Association 
v..  Smith  et  al.,  41  Md.  516  (usury); 
Baltimore  Permanent  Building  and 
Land  Society  t>.  Taylor,  41  Md.  409 
(usury);  Columbian  Building  Asso- 
ciation No.  4  v.  Crump,  42  Md.  192 
(tender);  Jackson  et  al.  T.  Myers  et 
al.,  43  Md.  452  (sealed  note);  Muth 


v.  Dolfield,  43  Md.  466  (S.  P.);  Wil- 
liar  v.  Baltimore  Butchers'  Loan  and 
Annuity  Association,  45  Md.  546 
(usury);  Birmingham  et  al.  v.  Mary- 
land Land  and  Permanent  Home- 
stead Association,  45  Md.  541  (usu- 
ry); Schaeffer  ».  Amicable  Perma- 
nent Land  and  Loan  Co.,  47  Md. 
126  (continuance  of  default  must  be 
alleged);  Frostburg  Building  Asso- 
ciation v.  Stark,47Md.  338  (equity^ 
injunction, — receiver);  Citizens'  Se- 
curity and  Land  Co.  v.  Uhler,  48  Md. 
455  (usury,— pleading,— Act  1872,  C. 
178  void);  Low  St.  Building  Asso- 
ciation No.  6  v.  Zucker,  48  Md.  448 
(effect  of  appointment  of  receiver, 
working  practical  dissolution) ;  Pe- 
ter's Building  Association  No.  5  v. 
Jaecksch.51  Md.198  (S.  P.);  Morrison 
et  al.  ».  Dorsey,  48  Md.  461  (plea  of 
nul  tiel  corporation, —  insufficient 
subscription  of  capital  stock,— notice 
of  payments  due);  Lamm  v.  Port 
Deposit  Homestead  Association,  49 
Md.  233  (agency, — caveat  emptor, — 
fraud);  Frostburg  Mutual  Building 
Association  v.  Lowdermilk,  50  Md. 
175  (deputation  to  sell  in  mortgage); 
Second  German  American  Building 
Association  v.  Newman,  50  Md.  62 
(recovery  of  usury  after  settlement,— 
Act.  1876,  C.  358,  valid);  Hennig- 
hausen  &  Wolff  v.  Tisher,  50  Md. 
583  (claim  of  corporators  against 
corporation,— withdrawal  balances) ; 
Frostburg  Mutual  Building  Associ- 
ation v.  Brace  et  al.,  51  Md.  508  (ac- 
knowledgment of  mortgage  by  agent 
of  corporation),  Con  way  r.  Log 
Cabin  Permanent  Building  Associa- 
tion, 52  Md.  137  (no  action  of  as- 
sumpsit  to  recover  sum  promised  to 
be  loaned, — agency);  Queen  City 
Perpetual  Building  Association  v. 
Price,  63  Md.  397  (deputation  in 


36  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  II. 


make,  siirn,  seal  and  acknowledge,  before  some 
officer  competent  to  take  the  acknowledgment  of  deeds,  a  certi- 
ficate in  writing,  in  which  shall  be  stated  :  1.  The  names  in  full 
and  place  of  residence  of  the  applicants.  2.  The  proposed 
corporate  name  of  the  corporation  which  shall  always  include 
the  name  of  the  county  or  city  in  which  it  may  be  formed. 
3.  The  object  or  purpose  for  which  incorporation  is  sought, 
the  time  of  its  existence  not  to  exceed  forty  years,  and  the 
articles,  conditions  and  provisions  under  which  the  incorpora- 
tion is  formed.  4.  The  place  or  places  where  the  operations 
of  the  corporation  are  to  be  carried  on,  and  the  place  in  this 
State  in  which  the  principal  office  of  the  corporation  wrill  be 
located.  5.  The  amount  of  capital  stock  of  the  corporation. 
6.  The  number  of  shares  of  stock  and  the  amount  (par  value) 
of  each  share.  7.  The  number  of  trustees,  directors,  or  man- 
agers, and  their  names,  who  shall  manage  the  concerns  of  the 
corporation  for  the  first  year."  The  certificate  thus  executed, 
shall  be  submitted  to  one  of  the  judges  of  the  proper  court 
who  may  determine  whether  it  is  in  Conformity  with  the  law,8 
and  if  he  so  finds,  shall  certify  his  determination  upon  the 
certificate,  which  shall  thereupon  be  recorded  in  the  office  of 
the  clerk  of  the  proper  court,  in  a  book  provided  for  that 
special  purpose.*  When  the  said  certificate  shall  have  been 
recorded,  the  persons  who  have  signed  and  acknowledged  the 
same,  and  their  successors  shall,  according  to  the  objects,  pur- 
poses, articles,  conditions  and  provisions  in  said  instrument 
contained,  become  and  be  a  body  politic  and  corporate,  in  fact 
and  in  law,  by  the  name  stated  in  such  certificate.* 

(fy  Any  such  corporation  formed  under  the  provisions  of 
this  article  shall  have  power  in  its  certificate  of  incorporation 
to  limit  the  number  of  shares,  which  each  stockholder  may  be 
allowed  to  hold  ;  to  prescribe  the  entrance  fee  to  be  paid  by 
each  stockholder  at  the  time  of  subscribing  ;  to  regulate  the 

mortgage  to  sell,  —  equity  of   pur-  dence,  the  amendment  and  alteration 

chaser  for  value).  of  charters,  clerk's  fees  and  endoree- 

1  One  of  the  corporations  belong-  mcnts,  general  powers  of  corpora- 

ing  to  Class  5,  Art.  40,  §  18.  lions  and  corporators,  and  similar 

*  Tit.  xxiii.  Art.  40,  §  37.  provisions  generally  applicable  to 

*  See  §  38.  corporations,  see  the  sections  follow- 

*  See  §  39.  ing  the  40th,   viz.,  §§  41-80;    see 

*  §  40.  As  to  the  certificate  as  evi-  also  §§  1-13. 


§  24.]  STATUTORY   PROVISIONS   OF  THE  STATES.  37 

instalments  to  be  paid  on  each  share :  Provided,  the  same 
shall  not  exceed  the  sum  of  one  dollar  per  share  per  week  ; 
and  the  times  at  which  the  same  shall  be  payable.1 

(c)  Any  such  corporation  shall  have  power  to  enforce  the 
payment  of  all  instalments  and  other  dues,  due  to  the  corpo- 
ration from  the  members  or  stockholders,  by  such  fines  and 
forfeitures,  as  the  corporation  may  from  time  to  time  provide 
in  the  by-laws  or  articles  of  association  of  such  corporation." 

(d)  Any  person  applying  for  membership,  or  for  stock  in 
any  such  corporation,  after  the  end  of  one  month  from  the 
time  of  incorporation,  may  be  required  to  pay  on  subscribing 
such  bonus  or  assessment  as  may  from  time  to  time  be  fixed 
or  assessed,  in  such  manner  as  may  be  provided  by  the  cor- 
poration, in  order  to  place  such  new  member  or  stockholder 
on  a  footing  with  the  original  members,  and  011161*8  holding 
stock  at  the  time  of  such  application.3 

(<?)  Such  corporation  may,  at  any  time  in  advance  of  the 
.  period  of  time  at  which  such  corporation  may  cease  to  exist, 
according  to  the  plan  contained  in  the  original  articles  of  as- 
sociation, advance  to  any  member  thereof,  for  such  premium 
as  may  be  agreed  upon,  the  sum  which  he  would  be  entitled 
to  receive  upon  the  dissolution  of  the  corporation,  for  any 
number  of  shares  therein  held ;  or  may  purchase  from  any 
member  thereof  the  share,  or  any  number  of  shares,  of  the 
stock  held  by  him,  at  such  price  or  sum  as,  according  to  the 
articles  of  association,  such  member  may  agree  to  receive,  and 
on  payment  of  said  sum  of  money  may  receive  from  such 
member  security  as  mentioned  in  the  next  succeeding  section 
of  this  article,  for  the  payment  by  such  member  to  such  cor- 
poration of  the  unpaid  instalments  to  be  paid  on  the  share  or 
shares  of  stock  so  sold  or  redeemed,  together  with  interest  at 
the  rate  of  six  per  cent,  per  annum  on  the  sum  so  paid  or  ad- 
vanced, at  such  times,  and  subject  to  such  fines  and  penalties 
for  the  nonpayment  thereof,  as  may  be  prescribed  in  the  arti- 
cles of  association  or  in  the  by-laws/ 

(f)  The  payment  of  the  unpaid  instalments  on  the  share 

or  shares  so  purchased  or  redeemed,  with  interest  on   the 

money  paid  therefor  as  aforesaid,  and  all  fines  and  penalties 

incurred  in  respect  thereof  by  any  member,  shall  be  secured 

'§86.  »§87.  »§88.  4§89. 


38  THE   LAW   OP   BUILDING   ASSOCIATIONS.         [CH.  II. 

to  such  corporation  by  mortgage  on  real  or  leasehold  property, 
or  by  the  hypothecation  of  stock  of  such  corporation  held  by 
such  members  as  may  be  provided  in  the  articles  of  associa- 
tion or  by-laws ;  but,  in  case  of  hypothecation  of  stock,  no 
greater  sum  of  money  shall  at  any  time  be  drawn  out  by  any 
member,  than  shall  have  been  already  paid  in  by  him  on  all 
his  shares  of  stock  at  the  time  of  hypothecation ;  and  any 
such  mortgage,  and  the  mortgage  debt  created  thereby,  and 
the  shares  of  stock  of  any  such  corporation,  and  of  all  cor- 
porations for  the  loan  of  money  on  mortgage  of  real  or  lease- 
hold property,  are  hereby  declared  exempt  from  taxation  to 
the  extent  of  such  corporation's  investment  in  such  mortgages, 
the  property  so  mortgaged  to  the  corporation  being  taxed  in 
the  hands  of  the  individual  member  or  mortgagor.1 

(g)  On  the  trial  of  any  action  or  other  proceeding  at  law 
or  in  equity,  in  which  the  property  or  interest  of  any  such 
corporation  may  be  in  any  wise  concerned,  any  member  of 
such  corporation  shall  be  a  competent  witness,  and  shall  not 
be  objected  to  on  account  of  any  interest  he  may  have  as  such 
member,  in  the  result  of  any  such  action  or  proceeding.2 

(A)  Any  association  of  persons,  which  may  have  been  or- 
ganized, or  established  at  any  time  prior  to  the  adoption  of 
this  article,  on  being  made  a  body  corporate,  under  the  pro- 
visions of  this  article,  shall  become  merged  in  such  corporate 
body  thereby  created,  and  every  act,  done  or  to  be  done  by 
any  such  unincorporated  association  of  persons,  relating  to  the 
ends  and  purposes  of  such  association,  and  all  mortgages, 
bonds,  or  other  instruments  made  to  such  association  of  per- 
sons, or  to  any  person  or  persons  for  the  use  of  such  associa- 
tion of  persons,  or  any  number  thereof  as  such,  shall  remain 
and  continue  in  full  force  and  virtue  at' law  and  in  equity,  in 
like  manner  as  if  such  incorporated  association  of  persons  had 
originally  been  a  body  corporate.* 

(i)  Any  trustee  or  trustees,  person  or  persons,  to  whom 
any  such  conveyance  shall  have  been  made,  to  and  for  the  use 
of  such  incorporated  association,  may  be  required  to  assign 
and  transfer  the  same  to  such  corporation,  and  they  shall  be 
as  good  and  sufficient  as  if  made  to  such  corporation,  and  all 

'  §  90  amended  by  Act  Apr.  14,  1880,  Laws  1880,  Ch.  351,  p.  509. 
9  §  91.  » §  92. 


25.] 


STATUTORY   PROVISIONS   OF  THE  STATES. 


39 


the  liabilities  and  obligations  of,  by,  and  between  the  mem- 
bers of  such  incorporated  association  of  persons  shall  remain 
of  as  binding  force  or  effect,  as  if  such  association  had  been 
from  the  first  incorporated.1 

(f)  It  shall  not  be  lawful  for  any  land  company,  home- 
stead, or  building  association,  or  any  association  formed  for 
the  purpose  of  lending  money,  or  using  the  corporate  funds 
for  the  purpose  of  buying,  selling,  lending  upon  mortgage, 
leasing,  or  otherwise  dealing  in  real  or  leasehold  estate,  to 
issue  any  promissory  note,  bill,  or  obligation  of  any  kind  to  any 
member  thereof,  or  borrower  therefrom,  in  lieu  of  money,  and 
all  loans  by  such  corporation  shall  be  made  in  money  and  not 
otherwise,  and  all  notes,  bills,  or  obligations  of  any  sort  issued 
by  any  such  association  to  or  for  the  use  or  benefit  of  any 
member  or  borrower  in  lieu  of  money,  and  all  deeds,  mort- 
gages, or  other  securities  whatsoever,  given  to  secure  the 
same,  shall  be  void,  and  of  no  force  and  validity  whatever, 
either  in  law  or  in  equity.8 

§  25.  Massachusetts.3    (a)   Any   number  of  persons   not 


1  §  93.  Section  94  is  omitted,  as  it 
is  believed  that  the  corporations  con- 
templated by  it  have  very  little  in 
common  with  building  associations 
properly  so-called.  They  belong  to 
the  class  of  corporations  appearing 
in  the  Baltimore  Permanent  Build- 
ing and  Land  Society  v.  Taylor,  41 
Md.  409,  Williar  v.  The  Baltimore 
Butchers'  Loan  and  Annuity  Asso- 
ciation, 45  Md.  546;  Birmingham  <o. 
The  Maryland  Lnnd  and  Permanent 
Homestead  Association,  45  Md.  541 ; 
Citizens'  Security  and  Land  Co.  «. 
Uhler,48  Md.  455,  in  which  last  case, 
the  Act  of  1872,  C.  178,  which  con- 
stitutes sec.  94  (omitted  here)  was  de- 
clared void  under  Art.31.sec.57  of  the 
Constitution  of  Maryland,  it  being 
merely  an  attempt  to  legalize,  in  the 
case  of  special  corporations,  the  tak- 
ing of  usurious  interest.  See  also 
Birmingham  v.  Association,  supra. 

»§95. 

*  Acts  and  Resolves  of  Massachu- 


setts, 1877,  pp.  613-623;  1881,  pp. 
594-596;  Acts  1877,  Ch.  224,  as 
amended  by  Acts  1881,  Ch.  271.  De- 
cisions: Fuller  v.  Salem  and  Danvers 
Loan  and  Fund  Association,  10  Gray 
94  (under  St.  1854,  C.  454;  with- 
drawal, equity, — jurisdiction  con- 
ferred by  statute  does  not  prevent 
member  from  suing  company  at  law 
where  a  proper  case  for  a  common 
law  remedy  is  shown);  Munuhan  v. 
Varuum,  11  Gray  405  (assignment, — 
foreclosure, — incorporation) ;  Merill 
v.  Mclntire,  13  Gray  157  (incorpora- 
tion,— bond  for  dues,— usury);  Bax- 
ters. Mclntire,ld.l68  (unincorporat- 
ed societies, —  foreclosure,  —  mort- 
gage for  dues,  agency,  usury);  Bar- 
ker v  Bigelow,15  Gray,  130  (loans, — 
validity  of  mortgage  and  bond,  — re- 
demption); Howard  Mutual  Loan 
and  Fund  Association  v.  Mclntire,  3 
Allen,  571  (unacknowledged  and  un- 
recorded mortgage, —  estoppel  from 
denial  of  membership);  Delano  r. 


40  THE   LAW  OF  BUILDING   ASSOCIATIONS.         [OH.  II. 

less  than  twenty-five  as  is  hereinafter  provided,  who  shall 
have  associated  themselves  together  by  an  agreement  in  writ- 
ing, such  as  is  hereinafter  described,  with  the  intention  to 
constitute  a  corporation  for  the  purpose  of  accumulating  the 
savings  of  its  members,  paid  into  such  corporation  in  fixed 
periodical  instalments,  and  the  lending  of  such  funds  so  ac- 
cumulated to  its  members,  shall  become  a  corporation  upon 
complying  with  the  provisions  of  this  act,  and  shall  remain  a 
corporation,  with  all  the  powers,  rights  and  privileges,  and 
subject  to  all  the  duties,  limitations  and  restrictions  conferred 
by  general  laws  upon  corporations  except  as  herein  otherwise 
provided.1 

(£)  Such  agreement  shall  set  forth  the  fact  that  the  sub- 
scribers thereto  associate  themselves  with  the  intention  to  con- 
stitute a  corporation,  the  name  by  which  the  corporation  shall 
be  known,  the  purpose  for  which  the  corporation  is  consti- 
tuted, the  town  or  city,  which  town  or  city  shall  be  within 
this  commonwealth,  in  which  it  is  established  or  located,  and 
the  limit  of  capital  to  be  accumulated." 

(c)  Any  name  may  be  assumed  for  such  corporation  not 
previously  in  use  by  an  existing  corporation  established  under 
the  laws  of  this  commonwealth,  and  the  name  assumed  in  the 
agreement  shall  not  be  changed  but  by  an  act  of  the  Legisla- 
ture.    The  words  "  Co-operative  Saving  Fund  and  Loan  As- 
sociation" shall  form  a  part  of  the  name.3 

(d)  The  provisions  of  the  ninth,  tenth  and  eleventh  sec- 
tions of  the  two  hundred  and  twenty-fourth  chapter  of  the 
Acts  of  the  year  1870  shall  apply  to  corporations  established 
under  the  provisions  of  this  act,  except  that  in  the  form  of 
certificate  signed  by  the  secretary  of  the  commonwealth,  the 
limit  of  capital  to  be  accumulated,  as  fixed  in  the  agreement 
of  association,  shall  be  inserted,  instead  of  the  capital,  that 
the  certificate  required  by  said  eleventh  section  to  be  filed  and 
recorded  may  be  signed  and  sworn  to  by  the  presiding  and 
financial  officers  and  a  majority  at  least  of  the  officers  pos- 
sessing the  powers  of  directors,  by  whatever  name  they  may 

Wild,  6  Allen,  1  (usury);  Bowker  v.  society  under  rules, — usury);  Cook 

Mill  River  Loan  Fund  Association,?  v.  Kent,  105  Mass.  246  (dissolution). 
Allen,  100  (relation  of  borrower  to         '  Acts  1877,  Ch.  234,  §  1. 
*  §  2.  3  §  3. 


§  25.]  STATUTORY   PROVISIONS   OF   THE   STATES.  41 

be  called,  and  that  the  fees  to  be  paid  for  filing  and  recording 
the  certificates  required  by  said  eleventh  section,  including 
the  issuing  of  the  certificate  of  organization  by  the  secretary 
of  the  commonwealth,  shall  be  five  dollars.1 

(e)  The  object  of  such  corporations  shall  be  the  accumula- 
tion of  a  capital  in  money,  to  be  derived  from  savings  and 
accumulations  by  the  members  thereof,  to  be  paid  into  said 
corporation  in  periodical  instalments,  and  in  fixed  and  cer- 
tain sums,  at  such  times  and  in  such  amounts,  as  shall  be 
hereinafter  designated ;  the  capital  so  as  aforesaid  to  be  accu- 
mulated by  any  corporation  created  by  virtue  hereof  shall  not 
exceed  in  the  aggregate  and  full  ultimate  value  thereof,  one 
million  dollars,  and  shall  be  divided  into  shares  of  the  ulti- 
mate value  of  two  hundred  dollars  each ;  and  said  shares  may 
be  issued  in  quarterly,  half  yearly  or  yearly  series,  in  such 
amounts  and  at  such  times  as  the  shareholders  may  deter- 
mine ;  and  payments  of  dues  or  instalments  on  each  series  or 
issue  of  shares   shall  commence   and   date   from   the   issue 
thereof.     No  person  shall  hold  more  than  twenty-five  shares 
in  the  capital  of  any  one  of  said  corporations.     No  shares  of 
a  prior  series  shall  be  issued  after  the  issue  of  a  new  series. 
New  shares  may  be  issued  in  lieu  of  shares  withdrawn,  can- 
celled or  forfeited.     Said  capital,  so  as  aforesaid  saved  and 
accumulated,  from  time  to  time  shall  be  loaned  or  advanced 
to  members  of  the  particular  corporation  holding  one  or  more 
shares  in  the  capital  thereof,  who  shall  from  time  to  time  de- 
sire to  anticipate  the  ultimate  value  of  their  shares,  and  shall 
give  security  for  the  prompt  and  continued   payment  of  all 
periodic  instalments  of  dues,  interest,  premium  and  fines, 
until  each  of  their  said  shares,  so  advanced  upon,  shall  be 
found  to  be  of  the  ultimate  value  of  two  hundred  dollars,  as 
hereinafter  provided.2 

(f)  The  number,  title,  functions  and  compensation  of  the 
officers  of  any  corporation  created  by  virtue  of  this  act,  their 
tenns  of  office,    the  time  of  their  election,  as  well  as  the 
qualifications   of   electors,  and   the  time  of  each  periodical 
meeting  of  the  officers  and  shareholders  of  said  corporation 
shall  be  provided  by  the  by-laws :  Provided,  that  no  member 
shall  be  entitled  to  more  than  one  vote  at  any  election.* 

1  §  4.  »  §  5.  « §  6. 


42  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.    II. 

(g)  The  said  officers  shall  hold  stated  monthly  meetings,  at 
which  each  shareholder  shall  pay  into  the  said  corporation  the 
periodical  instalments,  to  be  called  "  dues,"  on  account  of 
i-ach  share  subscribed  for  by  him,  together  with  such  interest 
and  premiums  on  advance's  made  from  time  to  time,  and  such 
iiiirs  as  shall  be  imposed  on  arrears,  as  is  hereinafter  pro- 
vided. The  moneys  so  as  aforesaid  saved  and  accumulated  at 
each  stated  monthly  meeting  from  dues,  interest,  premiums 
and  fines  as  aforesaid,  or  from  any  other  source  whatsoever, 
after  due  allowance  made  for  all  necessary  and  proper  ex- 
penses, and  subject  to  the  provisions  hereinafter  in  section  ten 
contained  and  set  forth  respecting  the  withdrawal  and  cancel- 
lation of  shares,  shall  be  offered  to  such  shareholder  or  share- 
holders as  shall  bid  the  highest  premium  for  preference  or 
priority  of  right  to  a  loan  or  advance  on  the  ultimate  value 
of  one  or  more  of  his  or  their  respective  shares ;  and  such 
shareholders  so  bidding  the  highest  premium  as  aforesaid  shall 
be  entitled  to  receive  a  loan  or  advance  of  two  hundred  dol- 
lars for  each  share  held  by  him :  Provided,  that  a  shareholder 
may  borrow  such  fractional  part  of  two  hundred  dollars  as 
the  by-laws  shall  provide.1 

In  case  there  shall  be  a  balance  of  money  remaining  unsold 
after  a  monthly  auction  sale,  the  directors  may  at  their  dis- 
cretion invest  the  same  in  any  of  the  securities  named  in  the 
second  clause  of  section  nine  of  chapter  two  hundred  and 
three  of  the  acts  of  the  year  1876.8 

(A)  For  every  loan  and  advance  made  as  aforesaid,  a  note 
secured  by  first  mortgage  of  real  estate  shall  be  given,  accom- 
panied by  a  transfer  and  pledge  of  the  shares  of  the  mem- 
ber or  members  so  as  aforesaid  obtaining  a  loan  or  advance. 
Said  shares  so  transferred  and  pledged  shall  be  held  by  said 
corporation  as  additional  or  collateral  security  for  the  per- 
formance of  the  terms,  covenants  and  conditions  of  said  note 
and  mortgage ;  and  all  payments  of  dues  by  a  member  so  as 
aforesaid  borrowing  or  obtaining  advances,  and  all  profits  and 
gains  from  time  to  time  accruing  and  adjusted  as  hereinafter 
provided  to  said  shares  so  transferred  and  pledged,  shall  be 
deemed  and  taken  to  be  payments  on  account  of  such  loan  or 
advance,  until  said  loan  or  advance  shall  be  cancelled  by  the 
1  §  7.  *  Acts  1881,  Ch.  271.  §  1,  Cl  4. 


§  25.]  STATUTORY    PROVISIONS    OF  THE   STATES.  43 

ultimate  value  of  such  share  or  shares  so  pledged  or  shall  be 
otherwise  sooner  cancelled  and  discharged.  Said  note  and 
mortgage  shall  recite  and  set  forth  the  number  of  shares 
pledged  and  transferred  by  the  particular  shareholder  so  bor- 
rowing, and  the  amount  of  money  advanced  thereupon,  and 
shall  be  expressed  to  be  conditioned  for  the  payment  at  the 
stated  meetings  of  the  corporation  of  the  monthly  dues  on 
the  number  of  shares  so  pledged  and  advanced  upon,  and  the 
interest  and  premium  upon  the  loan  or  advance  for  which 
said  shares  are  pledged  and  said  note  and  mortgage  giv°n,  to- 
gether with  all  lines  chargeable  upon  arrears  of  such  payment 
until  said  shares  shall  reach  the  ultimate  value  of  two  hun- 
dred dollars  each,  or  said  loan  shall  be  otherwise  sooner  can- 
celled and  discharged :  Provided,  however,  that  the  shares  of 
the  particular  corporation,  without  other  security,  may  in 
the  discretion  of  the  board  of  directors  be  so  pledged  and 
transferred  as  security  for  loans  or  advances  to  an  amount  not 
exceeding  the  assessed  and  adjusted  value  of  such  shares  at 
the  annual  or  other  settlement  and  adjustment  of  the  accounts 
of  said  corporation  next  preceding  the  time  of  such  loan  or 
advance.  In  case  a  shareholder  shall  neglect  to  offer  security 
for  a  loan,  or  offering  security,  it  shall  not  be  approved  of  by  the 
board  of  directors  by  such  time  as  the  by-laws  may  prescribe, 
his  right  to  such  loan  shall  be  forfeited  for  the  time  being, 
and  he  shall  be  charged  with  one  month's  interest  and  one 
month's  premium,  at  the  rate  bid  for  the  same  by  him,  to- 
gether with  all  expenses  incurred,  if  any,  and  the  money  so 
forfeited  shall  be  subject  to  re-loan  at  the  next  or  any  subse- 
quent stated  meeting.  In  case  of  nonpayment  by  borrowing 
shareholders  of  monthly  dues  and  interest  and  premiums  on 
loans  or  advances  and  all  fines  or  arrears  for  the  space  of  six 
months,  such  defaulting  borrower,  in  addition  to  the  original 
amount  loaned,  shall  be  charged  with  all  monthly  dues,  inter- 
est, premiums  and  fines  in  arrears,  and  shall  have  and  be  given 
credit  for  the  withdrawing  value  of  his  shares,  pledged  ami 
transferred  as  aforesaid,  in  accordance  with  the  rule  herein- 
after, in  section  ten,  provided  for  the  withdrawal  and  cancel- 
lation of  shares,  together  with  the  dues  paid  thereon  from  the 
next  preceding  adjustment  and  valuation  of  shares  to  the  date 
of  such  settlement;  and  the  balance  found  to  be  remaining 


44  THE   LAW  OP  BUILDING   ASSOCIATIONS.         [CH.  II. 

due  over  and  above  such  credit,  together  with  an  attorney's 
collection  fee  of  five  per  cent,  on  said  balance,  shall  be  en- 
forced and  recovered  on  his  security,  as  debts  of  a  like 
amount  are  now  enforced  and  recoverable  according  to 
law.1 

(i)  Each  shareholder  shall  pay  to  said  corporation,  at  or 
before  each  stated  monthly  meeting  of  the  directors,  as  a  con- 
tribution to  the  capital  thereof,  the  sum  of  one  dollar  as  dues 
for  each  and  every  share  held  by  him,  until  each  share  shall 
under  the  provisions  of  this  act  reach  the  ultimate  value  of 
two  hundred  dollars,  or  shall  sooner  be  forfeited,  cancelled  or 
withdrawn,  as  hereinafter  provided.  When  each  unpledged 
share  of  a  particular  series  shall  reach  the  ultimate  value  of 
two  hundred  dollars,  all  payments  thereon  shall  cease,  and 
the  holder  thereof  shall  be  entitled  to  receive,  and  shall  be 
paid  out  of  the  funds  of  the  said  corporation,  the  sum  of  two 
hundred  dollars  for  each  share  maturing  and  so  held  by  him, 
and  from  the  date  of  such  maturity  to  the  date  of  such  pay- 
ment shall  also  be  entitled  to  receive  and  shall  be  paid  inter- 
est at  the  rate  of  six  per  cent  per  annum  on  the  sum  so  due 
and  payable :  Provided,  however,  that  at  no  time  shall  more 
than  one  half  of  the  funds  in  the  treasury  be  applicable  to  the 
payment  of  such  matured  shares  without  the  consent  of  the 
directors  ;  and  provided,  further,  that  the  directors  of  said 
corporation  shall  have  the  power  at  their  discretion  to  retire 
the  unpledged  shares  of  any  particular  series,  by  enforcing 
the  withdrawal  of  the  same  at  any  time  after  the  lapse  of  four 
years  from  the  date  of  the  issue  thereof,  provided,  that  the 
retired  shareholders  shall  be  entitled  to  receive,  and  shall  be 
paid,  the  full  value  of  their  shares,  Jess  all  fines  and  a  propor- 
tionate part  of  any  unadjusted  loss,  and  provided,  further, 
that  all  shareholders  whose  shares  are  to  be  so  retired  shall  be 
determined  by  lot  under  such  regulations  as  the  directors  may 
prescribe.  A  borrowing  shareholder,  for  each  share  borrowed 
upon,  shall,  in  addition  to  the  dues  aforesaid,  pay  the  sum  of 
one  dollar  per  month  as  interest,  together  with  the  monthly 
premium  bid  for  said  loan,  as  hereinafter  in  section  twelve 
provided  for,  until  said  shares  shajl  reach  the  ultimate  value 
of  two  hundred  dollars  each,  when  said  shares  and  said  loan 
1  Acts  1877,  Ch.  224,  §  8;  Acts  1881,  Ch.  271,  §  1,  Cl.  1. 


§  25.]  STATUTORY   PKOVISIONS  OF  THE  STATES.  45 

shall  be  declared  cancelled  and  satisfied,  unless  otherwise 
sooner  paid  off  and  discharged.1 

(j )  A  shareholder  may  withdraw  at  any  time  by  giving 
thirty  days'  notice  of  his  desire  to  do  so  on  a  book  to  be  pro- 
vided by  said  corporation  for  the  purpose,  when  he  shall  be 
entitled  to  receive  the  amount  of  dues  paid  in  by  him  on  each 
of  his  shares,  together  with  such  proportion  of  the  profits  per 
share,  as  assessed  and  adjusted  at  the  settlement,  adjustment 
and  division  of  assets,  profits  and  losses  next  preceding  such 
notice,  as  the  by-laws  may  determine,  less  all  fines  and  the 
proportionate  part  of  all  losses  and  other  charges  accrued  sub- 
sequent to  said  next  preceding  assessment  and  adjustment : 
Provided,  however,  that  at  no  time  shall  more  than  one  half 
of  the  funds  in  the  treasury  be  applicable  to  the  demands  of 
withdrawing  shareholders  without  the  consent  of  the  board  of 
directors ;  and  further,  that  no  shareholders  shall  be  entitled 
to  withdraw  whose  shares  are  held  in  pledge  as  security  for  a 
loan  or  advance  on  the  same,  except  as  is  next  hereinafter  pro- 
vided.3 

(K)  A  shareholder  may  repay  a  loan  at  any  time  upon  ap- 
plication to  said  corporation,  whereupon,  on  settlement  of  his 
account,  he  shall  be  charged  with  the  full  amount  of  the  loan 
as  originally  made  to  him,  together  with  all  monthly  instal- 
ments of  dues,  interest,  premium  and  fines  then  remaining 
due  and  unpaid,  and  shall  receive  and  be  given  credit  for  the 
withdrawing  value  of  his  shares,  pledged  and  transferred  as 
security  for  said  loan,  in  accordance  with  the  rule  hereinbefore 
(in  section  ten)  provided  for  the  withdrawal  and  cancellation 
of  shares,  together  with  the  dues  paid  thereon  from  the  next 
preceding  adjustment  and  valuation  of  shares  to  the  date  of 
such  settlement,  and  the  balance  found  to  be  remaining  due 
over  and  above  such  credit  shall  be  received  by  said  corpora- 
tion in  full  satisfaction  and  discharge  of  said  loan  or  advance : 
Provided,  that  all  settlements  made  at  periods  intervening 
between  stated  meetings  of  the  directors,  shall  be  made  as  of 
the  date  of  the  stated  meeting  next  succeeding  such  settle- 
ment ;  and  provided,  that  a  shareholder  desiring  to  retain  his 
shares,  and  membership  thereunder,  may  at  his  option  repay 
his  loan  without  claiming  credit  for  said  shares,  whereupon 

1  Acts  1881,  Ch.  271,  §  1,  Cl.  3.  *  Acts  1877,  Ch.  224,  §  10. 


46  THE  LAW   OP  BUILDING   ASSOCIATIONS.          [CH.  II. 

said  shares  shall  be  re-transferred  to  him,  and  he  shall  assume 
and  be  entitled  to  all  the  privileges  of  non-borrowing  mem- 
bers, free,  clear,  and  discharged  of  and  from  any  claim  thereon 
by  reason  of  said  cancelled  loan  or  advance.1 

(Z)  Premiums  for  loans  or  advances  as  aforesaid,  shall  con- 
sist of  a  percentage  on  the  amount  to  be  loaned,  advanced,  or 
borrowed,  and  shall  be  a  charge  in  addition  to  interest  as  afore- 
said on  the  amount  loaned,  and  said  premium  shall  be  deemed 
and  taken  to  be  a  consideration  or  bonus,  paid  by  the  borrower 
for  the  present  and  immediate  use  and  possession  of  the  future 
or  ultimate  value  of  the  shares  so  pledged,  and  shall,  together 
with  interest  and  fines  paid,  be  received  by  said  corporation 
as  a  profit  on  the  amount  of  capital  invested  in  said  loan,  and 
shall  be  divided  and  distributed  to  the  various  shares,  several- 
ties  and  series  of  said  capital  in  the  way  and  manner  herein- 
after provided." 

(m)  Shareholders  who  shall  make  default  in  the  payment 
of  their  monthly  dues,  interest  and  premiums,  shall  be  charged 
a  fine  not  exceeding  two  per  cent  per  month  on  each  dollar 
of  such  dues,  interest  and  premiums  so  in  arrears.  No  fines 
shall  be  charged  after  the  expiration  of  six  months  from  the 
first  lapse  in  payment  of  said  dues,  interest  and  premiums, 
and  no  fine  shall  be  charged  upon  a  fine  in  arrears.  The 
shares  of  all  shareholders  who  shall  continue  in  arrears  for  a 
longer  period  than  six  months  shall,  at  the  option  of  the 
board  of  directors,  on  thirty  days'  notice  to  such  defaulting 
shareholder,  be  declared  forfeited,  and  in  default  of  payment 
of  said  arrears  before  the  expiration  of  said  thirty  days,  the 
withdrawing  value  of  said  defaulting  shares  at  the  time  of 
said  first  default  shall  be  ascertained,  and  after  deducting  all 
fines  and  other  legal  charges,  the  balance  remaining  shall  be 
transferred  to  an  account,  to  be  designated  the  "Forfeited 
Share  Account,"  and  shall  be  held  by  said  corporation,  with 
respect  to  the  shares  of  non-borrowing  members,  subject  to 
the  order  of  the  defaulting  shareholder  entitled  to  the  same 
without  any  interest  from  the  time  of  such  transfer,  and  upon 
notice  in  the  manner  hereinbefore  provided  (in  section  ten) 
for  the  withdrawal  and  cancellation  of  shares,  he  shall  be  en- 
ti;l;-<l  to  receive  the  balance  in  due  order  of  his  turn,  out  of 
1  §  11.  *  §  12. 


§  25.]  STATUTORY    PROVISIONS   OF  THE    STATES.  47 

the  funds  appropriated  to  the  payment  of  withdrawals.  And 
with  respect  to  the  shares  of  borrowing  members,  the  said 
directors  may  proceed  to  the  enforcement  and  recovery  of  the 
loan  or  advance  for  which  such  defaulting  share  or  shares  are 
or  shall  be  pledged,  in  the  manner  hereinbefore  provided,  and 
on  recovery  of  said  loan  said  shares  and  the  balance  due 
thereon  shall  revert  to  said  corporation  as  a  payment  on  ac- 
count of  said  loan,  and  shall  be  held  by  said  corporation  free, 
clear  and  discharged  of  and  from  all  interest,  claim  and 
demand  on  the  part  of  such  defaulting  borrower,  or  any  per- 
son or  persons  claiming  from  or  under  him,  her  or  them : 
Provided,  however,  that  all  shares  so  as  aforesaid  forfeited  or 
transferred  to  "  Forfeited  Share  Account"  shall  cease  to  par- 
ticipate in,  or  be  entitled  to  any  portion  of  the  gains  or  prof- 
its of  said  corporation  accruing  after  the  adjustment  and 
settlement  of  the  accounts  of  said  corporation  and  the  valua- 
tion of  shares  as  hereinafter  provided  next  preceding  the  date 
of  such  forfeiture  and  transfer.1 

(ri)  The  general  accounts  of  any  corporation  created  by 
virtue  of  this  act,  shall  in  all  cases  be  kept  upon  the  system 
of  accounting  known  as  "  double  entry ;"  all  instalments  and 
moneys  received  by  such  corporation  from  shareholders  shall 
be  receipted  for  by  a  person  or  persons  designated  by  the 
board  of  directors,  in  a  pass-book  provided  by  the  corporation 
for  the  use  of  and  to  be  held  by  each  member,  and  said  pass- 
book shall  be  plainly  marked  with  the  name  and  residence  of 
the  holder  thereof,  the  number  of  shares  held  by  him,  and 
the  number  or  designation  of  the  series  or  issue  to  which  said 
shares  respectively  belong,  and  the  date  of  the  issue  of  such 
series.  All  moneys  so  received  shall  be  originally  entered  by 
the  proper  officer  in  a  book  to  be  called  the  "  cash-book,"  to 
be  provided  by  said  corporation  for  the  purpose,  and  the 
entries  therein  shall  be  so  made  as  to  show  the  name  of  the 
payer,  the  number  of  shares,  the  number  or  designation  of 
the  series  or  issues  of  the  particular  share  or  shares  so  entered, 
together  with  the  amount  of  dues,  interest,  premiums  and 
lines  paid  thereon  as  the  case  may  be.  Each  payment  made 
shall  be  classified  and  entered  in  a  column  devoted  to  its  kind. 
Said  cash-book  shall  be  closed  after  the  termination  of  each 

'§  13. 


48  THE   LAW   OF  BUILDING   ASSOCIATIONS.          [CH.  II. 

stated  meeting,  and  shall  be  an  exhibit  of  the  receipts  of  all 
moneys  paid  at  said  meeting.  All  payments  nuide  by  said 
corporation  for  any  purpose  whatsoever,  shall  be  by  order, 
check  or  draft  upon  the  treasurer,  signed  by  the  President 
and  Secretary,  and  endorsed  by  the  person  or  persons  in 
whose  favor  the  same  shall  be  drawn.  The  name  of  the 
payer,  the  amount  paid,  and  the  purpose,  object  or  thing  for 
which  the  said  payment  shall  have  been  made,  together  with 
the  date  of  such  payment,  shall  be  entered  on  the  counterfoil 
or  margin  of  said  order,  check  or  draft.  The  treasurer  shall 
dispose  of  and  secure  the  safe  keeping  of  all  moneys,  balances, 
assets,  securities  and  property  of  said  corporation,  in  the  way 
and  manner  designated  by  the  by-laws,  and  the  treasurer  and 
secretary  shall  give  such  security  for  the  true  and  faithful 
performance  of  their  respective  duties  as  the  by-laws  may 
direct.1 

(0)  The  profits  and  losses  may  be  distributed  annually, 
semi-annually  or  quarterly,  to  the  shares  then  existing,  but 
shall  be  distributed  at  least  once  in  each  year,  and  whenever 
a  new  series  of  shares  is  to  be  issued.  Profits  and  losses  shall 
be  distributed  to  the  various  shares  existing  at  the  time  of 
such  distribution  to  the  then  value  of  the  share,  and  shall  be 
computed  upon  the  basis  of  a  single  share,  fully  paid  to  date 
of  distribution.  Losses  shall  be  apportioned  immediately  fol- 
lowing their  occurrence.1 

(p )  No  corporation  created  under  this  act  shall  cease  or 
expire  from  neglect  on  the  part  of  such  corporation  to  elect 
officers  at  the  time  mentioned  in  the  charter  or  by-laws,  and 
all  officers  elected  by  such  corporation  shall  hold  their  respect- 
ive offices  until  their  successors  are  duly  elected.8 

(^)  Any  corporation  created  by  or  under  this  act  is  hereby 
authorized  and  empowered  to  purchase  at  any  sheriffs  or  other 
judicial  sale,  or  at  any  other  sale,  public  or  private,  any  real 
estate  upon  which  such  corporation  may  have  or  hold  any 
mortgage,  judgment,  lien  or  other  incumbrance,  or  in  which 
such  corporation  may  have  an  interest ;  and  the  real  estate  so 
purchased,  to  sell,  convey,  lease  or  mortgage,  at  pleasure,  to 
any  person  or  persons  whatsoever:  Provided,  that  all  real 

1  §  14.  •  Acts  1881,  Ch.  271,  §  1,  Cl.  2. 

*  Acts  1877,  Ch.  224,  §  16. 


§  26.]  STATUTORY    PROVISIONS   OF   THE   STATES.  49 

estate  so  acquired  shall  be  sold  within  five  years  from  the  ac- 
quisition of  title  thereto.1 

(r)  Every  association  organized  under  the  authority  oi 
this  act,  shall  pay  to  the  treasurer  of  the  Commonwealth  a  tax 
on  account  of  its  shareholders,  of  three  quarters  of  one  per 
cent,  per  annum  on  the  amount  of  its  monthly  dues  paid  in 
by  such  shareholders,  exclusive  of  h'nes,  interest  and  pre- 
miums, to  be  assessed,  one  half  of  said  annual  tax  on  the 
average  amount  of  its  monthly  dues  .paid  in  for  the  six 
months  preceding  the  first  day  of  May,  and  the  other  on  the 
average  amount  of  its  monthly  dues  paid  in  for  the  six 
months  preceding  the  first  day  of  November,  and  all  property 
taxed  under  this  section  shall  be  otherwise  exempt  from  taxa- 
tion for  the  current  year  in  which  the  tax  is  paid.  The  pro- 
visions of  the  fifth,  eighth,  ninth  and  eleventh  sections  of  the 
two  hundred  and  twenty-fourth  chapter  of  the  Acts  of  the 
year  1862,  so  far  as  applicable  to  savings  banks,  shall  apply  to 
the  associations  organized  under  this  act." 

§  26.  Michigan.3  (a)  It  shall  and  may  be  lawful  for  any 
number  of  persons,  not  less  than  ten,  to  associate  themselves 
to  form  with  such  other  persons  as  shall  afterwards  associate, 
a  body  politic  and  corporate,  under  such  name  as  the  original 
associates  may  select,  for  the  purpose  of  saving  and  investing 
among  themselves  and  accumulating  sums  to  be  paid  at  in- 
tervals of  not  exceeding  one  month,  by  its  members,  in  pro- 
portion to  their  interests  in  the  funds  to  be  invested  or  ac- 
cumulated.4 

(b)  The  persons  associating  in  the  first  instance  shall  make 
and  subscribe  in  duplicate  an  instrument  in  writing,  stating 
the  name,  location  and  place  of  business  of  such  corporation ; 
the  amount  of  each  share  therein,  the  periods  for  payment  on 
the  shares,  and  the  amount  of  each  payment  thereon ;  the 
maximum  number  of  shares ;  the  officers  it  will  elect,  which 

1  §  17.  properly  belonging  to  the  class  here- 

2  §  18.  in  treated  of.    But  the  reader  is  also 
3PublicLaws,  Michigan,  Session     referred  to  Compiled  Laws  of  Michi- 

of  1877,  pp.  274-278,  Act  May  26,  gau  of  1871,  Ch.  93,  Act  Apr.  5, 

1877,  "An  Act  to  autliori/e  the  in-  1869,  Laws  1869,  p.  305,  and  to  Act 

corporation  of  co-operative  savings  Apr.  3,  187.3,  Laws  1873.  p.  85. 

associations."  The  provisions  of  this  4  Law*  1877,  p.  274,  Act  May  26, 

an  scorn  to  contemplate  associations  1877.  §  1. 


50  THE   LAW   OP   BUILDING    ASSOCIATIONS.          [CH.  II. 

shall,  include  a  president,'  secretary  and  treasurer,  and  the 
first  officers  may  be  named  therein ;  the  times  of  the  annual 
elections  ;  and  the  period  of  the  corporate  existence  of  such 
corporation,  which  shall  not  be  less  than  three  years  nor  more 
than  ten  years,  and  be  further  limited  to  the  number  of 
periods  necessary  to  pay  in  full  the  shares  subscribed  for  in 
the  manner  proposed ;  the  minimum  number  of  shares  to  be 
subscribed  for  previous  to  the  filing  of  said  instrument  as 
the  articles  of  association  of  said  corporation,  and  such  rules 
and  limitations  as  the  subscribers  shall  deem  proper  to  be  in- 
serted for  the  security  of  its  members.1 

(c)  Whenever  the  necessary  shares  shall  have  been  sub- 
scribed,  any  three  or  more  of  the  subscribers  may  annex  to 
one  of  the  counterparts  so  executed  an  affidavit  that  the  sub- 
scriptions are  genuine  and  made  in  good  faith  as  they  believe, 
and  thereupon  such  counterpart  and  affidavit  shall  be  tiled 
and  recorded  in  the  office  of  the  clerk  of  the  county  in  which 
the  business  of  the  corporation  is  to  be  conducted,  and  upon 
such  tiling  the  said  association  shall  become  a  body  politic 
and  corporate,  and  such  record  or  a  certified  copy  thereof 
shall  be  evidence  of  such  incorporation." 

(d)  Such  corporation  shall  in  no  case  borrow  moneys  or 
receive  deposits,  with  or  without  interest,  nor  shall  it  execute 
or  endorse,  or  buy  or  sell  commercial  paper,  or  in  any  way 
engage  in  the  business  of  banking ;  it  shall  accept  no  trusts 
or  agencies,  and  shall  engage  in  no  business  other  than  that 
of,  or  connected  with,  the  collection  of  the  dues  of  members 
of  the  corporation,  and  of  liquidating  the  obligations  of  the 
corporation  to  its  members.* 

(e)  The  shares  of  such  corporation  shall  be  not  less  than 
twenty-five  dollars  nor  more  than  one  hundred  and  twenty- 
five  dollars  each ;  the  total  nominal  amount  of  all  such  shares 
shall  not  exceed  three  hundred  thousand  dollars ;  no  person 
shall  become  the  owner  of  more  than  sufficient  of  said  shares 
to  amount  to  the  nominal  value  of  two  thousand  and  five 
hundred  dollars;  but  a  parent  or  guardian  may,  if  author- 
ized by  the  by-laws,  sign  for  and  become  personally  responsi- 
ble for  shares  to  be  taken  in  his  name  as  trustee  for  his  infant 
child  or  children  or  ward,  to  such  extent  as  the  by-laws  may 

1  g  2.  s  §  3.  »  g  4. 


I  2G.]  STATUTORY   PROVISIONS   OF  THE   STATES.  51 

permit,  but  not  exceeding  for  each  child  or  ward  the  said 
sum  of  twenty-five  hundred  dollars :  Provided,  however,  that 
this  provision  shall  not  authorize  such  subscription  by  a  guar- 
dian for  a  ward  and  payment  out  of  the  moneys  of  the  ward, 
except  authority  for  that  purpose  be  given  by  the  proper 
probate  court.1 

(f)  Every  holder  of  one  or  more  shares  in  said  corporation 
in  his  own  right,  who  is  of  full  age,  shall  be  entitled  to  one 
vote  and  no  more  at  all  meetings  of  the  corporation,  and  no 
vote  by  proxy  shall  be  allowed.     A  quorum  shall  consist  of 
such  number  not  less  than  fifteen  as  the  articles  of  associa- 
tion or  by-laws  shall  prescribe.8 

(g)  At  the  time  of  organizing  the  corporation  an  initia- 
tion fee  not  exceeding  one  dollar  may  be  charged  to  each 
member,  and  the  amount  of  the  initiation  fee  may  be  from 
time  to  time  increased  to  such  sum  as  in  the  judgment  of  the 
members  constituting  a  quorum  at  any  regular  meeting  may 
be  required  to  make  the  investment  of  a  new  member  equal 
to  that  of  an  original  corporator.3 

(A)  The  by-laws  to  be  adopted  by  such  corporations  shall 
provide  for  the  collection  of  fines  by  way  of  penalty  for  any 
failure  to  pay  periodical  dues,  or  to  carry  into  effect  any 
agreement  made  by  the  corporation  with  a  member,  or  for 
any  other  infraction  of  the  reasonable  by-laws  of  the  corpora- 
tion or  of  its  articles  of  association,  and  such  fines  shall  be  a 
lien  upon  the  interest  of  the  member  upon  whom  they  are 
imposed  in  the  said  corporation,  which  lien  may  be  enforced 
and  collected  in  such  mode  as  the  articles  of  association  or 
by-laws  may  provide :  Provided,  however,  that  the  amount 
of  all  unpaid  fines  chargeable  against  any  member,  who  is 
not  an  officer  of  the  corporation,  shall  at  no  time  exceed  the 
annual  profits  of  such  member  upon  the  share  or  shares  held 
by  him,  and  any  member,  not  an  officer,  shall  be  entitled  at 
any  time,  by  making  a  demand  in  writing,  and  a  surrender  to 
the  corporation  of  all  accrued  profits,  to  be  repaid  all  moneys 
paid  by  him  on  his  share  or  shares,  except  initiation  fees, 
and  with  such  interest,  if  any,  as  the  by-laws  shall  in  such 
case  (cases)  provide.  Such  surrender  of  profits  shall  cancel 
all  fines  against  members  who  are  not  officers,  and  the  cor- 
1  §  5.  •  §  6,  p.  275.  •  §  7. 


52  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

poration  shall  repay  such  moneys  before  it  shall  make  other 
liquidations  of  its  liabilities  to  members.  If  any  member 
shall  continuously  neglect  for  sixty  days  to  pay  the  periodic 
dues  required  of  or  tines  imposed  upon  him,  it  shall  be  law- 
ful for  the  corporation  to  pay  or  tender  to  him  the  amount 
which  he  may  have  actually  paid  as  periodic  dues,  without 
interest,  or  with  such  interest  as  the  by-laws  may  in  such 
cases  provide  for,  and  with  or  without  the  initiation  fee,  as  the 
by-laws  shall  provide,  and  thereupon  all  the  rights  and  liabili- 
ties of  such  member  in  the  said  corporation  shall  cease  and 
determine.1 

(*)  Any  member  may  dispose  of  any  share  held  by  him 
to  any  member  holding  less  than  the  maximum  number  of 
shares,  or  to  any  other  person  who  may  be  approved,  in  such 
manner  and  upon  such  conditions  as  the  by-laws  shall  pre- 
scribe.9 

(j)  All  arrangements  for  the  liquidation  of  shares  shall  be 
made  with  a  member  of  the  corporation,  upon  security  to  be 
given,  which  security  shall  consist  either  of  unencumbered 
real  estate  worth  not  less  than  twice  the  amount  depending 
on  such  security,  upon  a  bond  and  mortgage  duly  executed 
and  acknowledged,  or  upon  shares  in  said  corporation,  upon 
estimates  according  to  the  dues  actually  paid  thereon.3 

(k)  It  shall  and  may  be  lawful  at  any  regular  meeting  of 
the  corporation  to  offer  to  purchase,  with  any  money  then  or 
soon  to  be  in  the  treasury,  the  share  or  shares  of  the  member, 
who,  at  an  auction  or  bidding  there  to  be  held,  shall  allow  the 
greatest  discount  from  the  par  value  of  his  share  or  shares, 
upon  a  purchase  of  the  same,  subject  to  the  payment  by  the 
seller  of  the  regular  periodical  dues  and  the  payment  by  him 
of  such  additional  periodic  sums,  not  exceeding  the  rate  of 
seven  per  cent,  per  annum  on  the  nominal  amount  of  the 
shares,  as  may  be  prescribed  by  the  by-laws.  If  at  the  said 
auction  or  bidding  no  member  present  or  represented  shall 
offer  to  allow  a  discount,  subject  to  the  payment  by  him  of 
such  original  and  additional  periodic  dues,  it  shall  be  lawful 
to  cast  lots  in  such  manner  as  the  by-laws  shall  prescribe,  to 
determine  the  share  in  said  corporation,  which  shall  be  paid 
and  extinguished  with  the  said  moneys,  and  the  same  shall 
1  §  8.  «  §  9,  p.  276.  « §  10. 


§  26.]  STATUTORY   PROVISIONS  OF  THE  STATES.  53 

be  applied  according  to  said  lot  upon  the  like  securities  being 
given  as  in  other  cases :  Provided,  that,  in  case  the  owner  of 
the  share  so  designated  by  lot  shall  not  give  the  requisite 
security,  then  that  the  money  shall  be  deposited  in  some  bank 
upon  such  interest  as  can  be  obtained,  there  to  remain  as 
security  for  such  payments  till  by  the  regular  application  of 
the  same  to  the  payment  of  dues  the  share  shall  be  fully 
paid  :  Provided  further -,  however,  that  such  portion  of  the 
same  shall  be  paid  to  the  owner  of  such  share  as,  in  the  judg- 
ment of  the  committee  or  officers  authorized  by  the  by-laws 
to  decide,  can  be  safely  paid,  and  leave  such  payments  to  be 
made  to  the  corporation  adequately  secured.1 

(I)  Any  officer  not  acting  as  auctioneer  may  bid  at  any 
auction  authorized  by  this  act,  but  if  the  purchase  shall  be 
struck  off  to  any  officer  having  anything  to  do  with  the  tak- 
ing of  securities,  or  if  the  share  of  such  officer  shall  be  desig- 
nated by  the  lot  mentioned  in  the  last  preceding  section,  the 
security  which  such  officer  shall  offer,  shall  be  brought  before 
a  regular  meeting  of  the  corporators,  and  approved  before 
any  money  shall  be  advanced  or  paid  thereon.3 

(m)  No  member  of  such  corporation  shall  receive  any 
greater  pecuniary  benefit  or  advantage  from  his  share  therein 
than  its  payment  in  full,  at  its  nominal  or  par  value ;  every 
discount  and  sum  of  interest  allowed  or  paid,  and  every  fine 
or  penalty  collected  shall,  equally  and  ratably  in  proportion 
to  their  shares,  be  for  the  benefit  and  advantage  of  selling 
and  non-selling  members,  and  every  agreement  which  any 
shareholder  may  make  in  regard  to  payments  for  his  share,  or 
for  additional  payments  in  case  of  a  sale  thereof,  shall  be 
construed  to  have  been  fully  performed  whenever  he  shall 
have  contributed  in  dues  or  additional  dues,  his  ratable  pro- 
portion of  the  sums  necessary,  with  the  profits  accruing  from 
initiation  fees,  discounts,  dues,  fines,  and  all  other  sources, 
after  paying  all  expenses,  to  pay  in  full  all  shares  in  the  cor- 
poration. Whenever  such  payments  shall  have  been  made, 
the  said  corporation  shall  cease  and  determine  for  all  pur- 
poses, except  winding  up  its  affairs.  The  cancellation  and 
discharge  of  a  security  given  by  a  selling  shareholder,  to  an 

»8 11.  '12. 


54  THE  LAW  OP  BUILDING  ASSOCIATIONS.          [CH.  II. 

amount  equal  to  his  share  or  shares  shall  be  deemed  the  pay- 
ment thereof.1 

(ri)  The  interests  of  the  shareholders  of  such  corporations 
shall  be  deemed  personal  estate,  and  shall  be  liable  to  taxation 
in  the  ward  or  township  in  which  they  reside,  which  taxation 
shall  be  in  lieu  of  all  taxes  against  said  corporation,  and  the 
books  of  every  corporation  of  this  class  shall  be  so  kept  as  to 
show  the  interests  of  each  shareholder,  and  shall  be  open  at 
all  reasonable  times  to  the  inspection  of  officers  charged  with 
the  duty  of  making  assessments  for  any  purpose.* 

(0)  No  corporation  authorized  by  this  act  shall  become 
the  owner  of  any  real  estate  except  by  purchase  at  sales  made 
upon  foreclosure  of  mortgages  taken  by  it,  and  in  such  case, 
the  land  purchased  shall  be  sold  and  disposed  of  within  two 
years  after  the  purchase:  Provided,  Jwwever,  that  it  may 
rent  an  office  or  room  for  holding  the  meetings  of  the  cor- 
porators, as  may  be  convenient  or  necessary.* 

(p)  Any  voluntary  association  which,  before  the  going 
into  effect  of  this  act,  may  have  been  organized  for  like  pur- 
poses, may,  by  the  unanimous  consent  and  agreement  in  writ- 
ing of  its  members,  become  a  body  corporate  under  this  act, 
upon  filing  the  original  articles  of  association  of  its  members, 
and  such  consent  and  agreement  in  writing ;  which  consent 
and  agreement  shall  state  all  particulars  required  by  the  sec- 
ond section  of  this  act,  not  already  stated  in  the  original  arti- 
cles, and  modify  such  articles,  if  necessary,  to  conform  them 
to  this  act,  with  the  county  clerk  of  the  county,  as  required 
by  the  third  section  hereof ;  arid  such  articles,  consent  and 
agreement,  having  first  annexed  to  them  an  affidavit  made  by 
three  or  more  of  the  incorporators,  that  the  signatures  to  such 
articles  and  consent  and  agreement  are  genuine,  that  the  per- 
sons signing  such  consent  and  agreement  are  all  the  members 
of  such  association,  and  that  such  original  articles,  consent  and 
agreement  were  executed  in  good  faith  as  the  affiants  believe, 
being  so  duly  filed  and  recorded  on  the  record  thereof,  shall 
be  evidence  of  the  fact  of  incorporation,  and  all  acts  of  such 
association,  of  which  a  proper  record  shall  have  been  kept 
from  the  date  of  its  original  organization,  not  inconsistent 

'§13.  *§  14  p.  277. 


§  ^6.]  STATUTORY   PROVISIONS  OF  THE  STATES.          .          55 

with  this  act,  shall  be  deemed  valid  and  binding  as  though 
the  original  organization  had  been  under  this  act.1 

(q)  Every  corporation  may  require,  by  its  by-laws  or  other- 
wise, bonds  from  its  president,  treasurer  and  other  officers,  to 
the  amounts  and  to  the  extent  which  it  shall  judge  necessary 
to  secure  the  safe-keeping  of  its  moneys  and  the.  faithful  per- 
formance of  the  duties  of  its  officers.  The  duties  of  all  offi- 
cers shall  be  prescribed  by  by-laws  adopted  by  the  corpor- 
ators, and  all  powers  granted  by  this  act,  not  expressly  de- 
volved thereby,  or  by  the  articles  of  association,  or  some 
by-law  upon  one  or  more  officers  of  the  corporation,  shall 
be  exercised  by  the  corporators  only,  at  meetings  where  the 
quorum  required  by  section  six  shall  be  present.11 

(r)  Every  corporation  formed  under  this  act  shall,  in  the 
month  of  January  in  each  year,  make  a  report  in  writing, 
under  the  oaths  of  two  or  more  of  its  officers,  showing  the 
condition  of  its  affairs  at  the  close  of  the  pending  (preceding) 
year  to  the  following  extent : 

First.  The  amount  of  its  shares  which  have  been  sub- 
scribed for ; 

Second.  The  amount  which  has  been  paid  upon  such  sub- 
scriptions in  dues  and  penalties ; 

Third.  The  number  of  shares  which  have  been  pur- 
chased, and  the  gross  amount  of  the  discount  allowed  upon 
purchases ; 

Fourth.  The  number  of  shares  otherwise  paid  and  extin- 
guished ;  and 

Fifth.  The  gross  amount  of  the  debts  of  the  corporation ; 

Which  report  shall  be  filed  in  the  office  of  the  clerk  of 
said  county.  The  attorney-general  of  the  State  may  at  any 
time  require  further  and  detailed  reports  to  be  made  to  him 
as  to  the  affairs  of  any  or  all  such  corporations  to  any  extent 
which  in  his  judgment  the  public  interest  may  require,  and 
he  may  personally  make  any  investigation  of  their  books,  pa- 
pers and  securities,  which  he  shall  judge  for  the  interest  of 
the  public.3 

(*)  Every  member  of  such  corporation,  and  every  creditor 
whose  just  claim  exceeds  twenty-five  dollars,  shall  at  all  rea- 

1  §  16.  17.  3  §  18,  p.  278. 


56  TUE   LAW   OF    KL'ILDINO   ASSOCIATIONS.          [«  11.   11. 

sonable  times  be  allowed  to  inspect  the  records  and  securities 
of  said  corporation.1 

(t)  The  shareholders  of  every  such  corporation  shall  be 
severally  and  jointly  liable  for  all  labor  performed  for  such 
corporation,  but  no  suit  shall  be  brought  against  them,  or  any 
of  them,  until  after  an  execution  shall  have  been  returned 
unsatisfied  against  said  corporation,  or  the  same  shall  have 
been  judicially  declared  bankrupt ;  and  any  stockholder  who 
may  have  been  so  compelled  to  pay  such  debt  may  collect  of 
any  other  stockholder  his  ratable  proportion  thereof.* 

(u)  The  circuit  court  for  the  county  in  which  any  cor- 
poration organized  under  this  act  shall  be  located  may,  on  ap- 
plication of  the  corporation,  or  on  petition  of  any  member  or 
creditor  aggrieved  by  delay  in  winding  up  its  affairs,  and  no- 
tice to  the  corporation,  make  such  order  and  direction  as  it 
shall  deem  best  calculated  to  secure  the  just  and  speedy  dis- 
position of  its  unsettled  or  uncompleted  business.3 

§  27.  Minnesota.4  (a}  Any  number  of  persons,  not  less 
than  three,  who  have  or  shall,  by  articles  of  agreement  in 
writing,  associate  according  to  the  provisions  of  this  title,  un- 
der any  name  assumed  by  them  ....  for  the  purpose  of 
establishing  a  saving-fund,  loan  or  building  association,  (or 
association  for  buying,  owning,  improving,  selling  and  deal- 
ing in  lands,  tenements,  etc.),  and  who  have,  or  shall  comply 
with  the  provisions  of  this  title,  shall,  with  their  associates, 
successors  or  assigns,  constitute  a  body  corporate  and  politic, 
under  the  name  assumed  by  them  in  the  articles  of  agree- 
ment :  Provided,  no  company  shall  take  a  name  previously 
assumed  by  any  other  company.  Any  such  association  for 
buying,  owning,  improving,  selling  and  dealing  in  lands,  ten- 
ements and  hereditaments,  real,  mixed  and  personal  estate 
and  property,  shall  have,  and  may  exercise  and  enjoy,  all  the 
franchises,  rights,  powers  and  privileges  of  a  corporation,  as 
provided  in  this  title  and  act,  and  the  same  is  made  capable 
and  authorized  in  law  and  in  equity  to  have,  own,  purchase, 
receive,  possess  and  retain  to  itself  and  successors,  lands,  ten- 
ements and  hereditaments,  real,  personal  and  mixed  estate 

1  §  19.  4  General  Statutes  of  Minnesota, 

8  §  20.  1878,  Ch.  34,  Title  2,  §  45;  Ch.  23, 

*§S1.  §8. 


§  27.]  STATUTORY   PROVISIONS  OF  THE  STATES.  57 

and  property,  and  to  use  and  enjoy  the  same,  and  the  same  im- 
prove by  erecting  thereon  dwelling-houses  and  other  buildings, 
and  otherwise  to  improve  the  same  in  such  manner,  and  for 
such  purposes  as  may  become  necessary,  or  as  such  corpora- 
tion may  deem  proper ;  to  sell,  convey,  lease,  let,  mortgage, 
or  otherwise  dispose  of,  charge  or  encumber  such  lands  and 
other  property,  or  any  right  or  interest  therein,  at  pleasure, 
and  on  such  terms  as  the  corporation  may  determine  by  or- 
der of  its  directors,  or  establish  by  its  by-laws ;  and  for  that 
purpose  to  make  and  deliver,  accept  and  receive,  all  necessary 
deeds,  conveyances,  mortgages,  leases  and  other  contracts,  and 
to  have  and  exercise  all  necessary  rights,  franchises,  muni- 
ments, estate,  powers  and  privileges ;  such  corporation  is  au- 
thorized to  loan  money  and  funds,  and  secure  such  loan  by 
mortgage,  or  other  security,  and  any  premium  taken  by  such 
association  for  the  preference  of  such  loans,  or  on  any  sale  or 
disposition  of  its  lands  or  other  property,  or  any  premium  for 
preference  or  priority  taken  by  any  mutual  building  associa- 
tion for  any  loan  of  its  funds,  shall  not  be  deemed  interest 
within  the  meaning  of  any  law  of  this  State,  nor  shall  any  ex- 
cess of  such  premiums  over  any  rate  of  interest  permitted  by 
the  laws  of  this  State,  be  deemed  in  any  court  of  law  or  equity 
to  be  usury.  Any  association  organized  under  this  title  is  em- 
powered to  purchase  at  any  sheriff's  or  other  judicial  sale,  or 
at  any  other  sale,  public  or  private,  and  to  hold  any  real  estate 
upon  which  such  associates  or  association  may  hold  any  mort- 
gage, judgment,  lien,  or  other  incumbrance,  or  may  have  an 
interest;  and  the  real  estate  so  purchased  to  sell,  convey, 
lease  or  mortgage,  at  pleasure,  to  any  person  whatever :  Pro- 
vided, however,  that  no  mutual  building  association,  nor  as- 
sociation for  buying,  selling  and  dealing  in  lands,  etc.,  shall 
loan  its  funds  except  to  its  own  members.1 

(b)  None  of  the  provisions  of  an  act  entitled  "  An  act  to 
amend  sec.  1  of  chap.  23,  of  General  Statutes  of  1866,"  the 
same  being  chap.  38  of  the  Statutes  at  Large,  relating  to  in- 
terest on  money,  shall  apply  to  mutual  building  associa- 
tions." 


1  Ch.  34,  Title  2,  $5  4.1;  Acts  1878,         »  Ch.  28,  §  8;  Acts  1877,  Ch.  95, 
Ch.  10.  SI.  S  1 


58  THE   LAW  OP  BUILDING  ASSOCIATIONS.         [CH.  II. 

§  28.  Missouri.1  (a)  Any  ten  or  more  persons  in  any 
county  of  this  State,  who  shall  have  associated  themselves  by 
articles  of  agreement  in  writing,  as  provided  by  law,  for  the 
purpose  of  forming  a  mutual  savings  fund,  loan,  or  building 
association,  may  be  incorporated  under  any  name  or  title, 
designating  such  business.' 

(b)  The  articles  of  agreement  mentioned  in  §  958  shall  set 
out :  First,  the  corporate  name  of  the  proposed  corporation, 
which  shall  not  be  the  name  of  any  corporation  heretofore 
incorporated  in  this  State  for  similar  purposes ;  second,  the 
name  of  the  city,  or  town,  and  county,  in  which  the  corpora- 
tion is  to  be  located ;  third,  the  amount  of  the  capital  stock 
of  the  corporation,  the  number  of  shares  into  which  it  is 
divided  and  their  par  value ;  the  number  of  shares  subscribed 
for  being  not  less  than  three  hundred  in  number,  and  that 
the  entrance  fees  are  paid  in ;  fourth,  the  names  and  places 
of  residence  of  the  several  shareholders,  and  the  number  of 
shares  subscribed  by  each  ;  fifth,  the  number  of  directors  and 
managers,  and  the  names  of  those  agreed  upon  for  the  first 
year ;  sixth,  the  number  of  years  the  corporation  is  to  con- 
tinue, which  in  no  case  shall  exceed  twenty  years ;  seventh, 
the  purposes  for  which  the  association  is  formed.     The  arti- 
cles of  agreement  shall  be  signed  and  acknowledged  by  the 
parties  thereto,  recorded  in  the  ofiice  of  the  recorder  of  deeds 
of  the  county  or  city  in  which  the  corporation   is  to  be 
located,  and  then  filed  and  recorded  in  the  office  of  the  Sec- 
retary of  State.* 

(c)  The  capital  stock  of  any  corporation  created  under  this 
article  shall  at  no  time  consist  of  more  than  two  thousand 
five  hundred  shares,  of  not  less  than  two  hundred  dollars 
each,  the  instalments  of  which  stock  are  to  be  paid  at  such 
time  and  place  as  the  by-laws  shall  appoint ;  no  periodical 
payment  to  be  made  exceeding  two  dollars  on  eacli  share ; 
every  share  of  the  stock  shall  be  subject  to  a  lien  for  the 
payment  of  unpaid  instalments  and  other  charges  incurred 
thereon  under  the  provision  of  the  charter  and  by-laws,  and 

1  Rev.  Stat.  of  Missouri,  1879,  Art.  of  members);  The  Chillicote  Sav- 

x.  p.  175,  §§  958-969.      Decisions:  ings  Association  ®.  Ruegger  et  al. ,  60 

State  Savings  Association  v.  Kellog  Mo.  218  (averment  of  incorporation), 

et  al.,  63  Mo.  540  (personal  liability  s  §  958.                     8  §  959. 


§28.J  STATUTORY    PROVISIONS   OF  THE   STATES.  59 

the  by-laws  may  prescribe  the  form  and  manner  of  enforcing 
such  lien ;  new  shares  of  stock  may  be  issued  in  lieu  of  shares 
withdrawn  or  forfeited ;  the  stock  may  be  issued  in  one  or  in 
successive  series,  in  such  amount  as  the  board  of  directors  or 
the  shareholders  may  determine  ;  any  shareholder  wishing  to 
withdraw  from  said  corporation,  shall  have  power  to  do  so  by 
giving  thirty  days'  notice  of  his  or  her  intention,  when  he  or 
she  shall  be  entitled  to  receive  the  amount  paid  in  by  him  or 
her,  and  such  proportion  of  the  profits  as  the  by-laws  may 
determine,  less  all  fines  and  charges :  Provided,  that  at  no 
time  shall  more  than  one  half  of  the  funds  in  the  treasury  be 
applicable  to  the  demands  of  withdrawing  stockholders  with- 
out consent  of  the  board  of  directors,  and  no  shareholder  be 
entitled  to  withdraw,  whose  stock  is  held  in  pledge  for  se- 
curity ;  upon  the  death  of  a  shareholder,  his  or  her  legal  rep- 
resentatives shall  be  entitled  to  receive  the  full  amount  paid 
in  by  him,  or  her,  and  legal  interest  thereon,  first  deducting 
all  charges  that  may  be  due  on  the  stock ;  no  fines  shall  be 
charged  to  a  deceased  member's  account  from  or  after  his  or 
her  decease,  unless  the  legal  representatives  of  the  decedent 
assume  the  future  payments  on  the  stock.1 

(d)  Every  such  corporation   shall  lend  its  funds  on  real 
estate  security  only,  and  upon  the  terms  and  in  the  manner 
specified  by  the  by-laws.     Such  corporation  may,  however, 
employ  a  portion  of  its  capital  stock,  not  exceeding  fifty 
thousand  dollars  at  any  one  time,  in  the  purchase  of  real  es- 
tate, and  the  erection  of  buildings  thereon  for  rent  or  other- 
wise :  Provided,  that  if  at  any  time  it  happen  that  there  is 
no  demand,  by  any  of  its  shareholders,  for  the  funds  of  such 
corporation,  then  such  funds  may  be  loaned  to  others,  who 
are  not  stockholders.4 

(e)  The  officers  of  the  corporation  shall  hold  stated  meet- 
ings, at  which  the  money  in  the  treasury,  if  equal  to  one 
share  of  stock,  shall  be  offered  for  loan  in  open  meeting,  and 
the  shareholder  bidding  the  highest  premium  for  the  prefer- 
ence of  priority  shall  be  entitled  to  receive  a  loan  equal  in 
amount  to  the  shares  of  stock  held  by  him  :  Provided,  that  a 
shareholder  may  borrow  such  fractional  part  of  a  share  as  the 
by-laws  may  provide,  and  good  and  ample  security  shall  be 

1  p  960.  8  §  961. 


60  THE  LAW  OF  BUILDING   ASSOCIATIONS.          [CH.  II. 

given  by  the  borrower ;  in  case  he  neglect  to  offer  security, 
or  offers  security  not  approved  by  the  board  of  directors,  by 
such  time  as  the  by-laws  prescribe,  he  or  she  shall  be  charged 
with  one  month's  interest,  together  with  any  expenses  in- 
curred, and  the  money  shall  be  reloaned  at  the  next  stated 
meeting ;  in  case  of  nonpayment  of  interest  and  instalments, 
by  borrowing  shareholders,  for  the  space  of  six  months,  pay- 
ment of  principal  and  interest,  without  deducting  the  pre- 
mium paid  or  interest  thereon,  may  be  enforced  by  proceed- 
ing on  their  securities  according  to  law.1 

(f)  A  borrower  may  repay  a  loan  at  any  time,  and  in  case 
of  the  repayment  thereof  before  the  expiration  of  the  eighth 
year  after  the  organization  of  the  corporation,  there  shall  be 
refunded  to  the  borrower  one  eighth  of  the  premium  paid 
for  every  year  of  the  eight  years  thus  unexpired  ;  and  in  case 
of  recovery  of  loans  by  process  of  law,  when  the  amount 
collected  by  or  distributed  to  the  said  corporation,  shall  exceed 
the  amount  of  loan  taken  by  the  borrower,  with  interest  or 
charges,  the  money  shall  be  reloaned  at  the  next  stated  meet- 
ing, and  the  excess  recovered,  beyond  the  amount  required  to 
pay  the  loan,  interest  and  charges,  shall  be  returned  to  the 
borrower,  from  whom  the  money  was  collected,  or  his  legal 
representatives ;  and  provided,  that  if  the  premium  offered 
for  the  reloan  shall  be  greater  than  that  originally  given  by 
the  defaulting  borrower,  the  amount  of  the  original  premium 
only  shall  be  paid  over  by  the  corporation ;  and  provided, 
that  such  defaulting  borrower  may,  at  any  time  after  the  said 
reloaning,  demand  from  the  corporation,  the  amount  to  be 
paid  to  a  shareholder  withdrawing  his  stock,  saving  and  ex- 
cepting, however,  to  the  corporation,  the  right  to  retain  so 
much  thereof  as  may  be  requisite  to  save  it  from  loss,  in  case 
the  amount  recovered  shall  not  suffice  to  pay  the  reloan.* 

(g)  No  premiums,  lines  or  interest  on  such  premiums,  that 
may  accrue  to  the  said  corporation  according  to  the  provisions 
of  this  article,  shall  be  deemed  usurious ;  and  the  same  may  be 
collected  as  debts  of  like  amount  are  now  by  law  collected.' 

(A)  No  corporation  created  under  this  article  shall  cease  or 
expire  from  neglect,  on  the  part  of  the  corporators,  to  elect 
officers  at  the  time  mentioned  in  the  articles  of  agreement  or 
1  §  962.  »  g  963.  3  §  964. 


§29.]  STATUTORY   PROVISIONS  OF  THE   STATES.  61 

by-laws;  and  all  officers  elected  by  such  corporation  shall 
hold  their  offices  until  their  successors  are  duly  elected.1 

(i)  Any  savings  fund,  loan  or  building  association,  incor- 
porated under  the  laws  of  this  State  is  hereby  authorized  and 
empowered  to  purchase  at  any  sheriffs  or  other  judicial  sale, 
or  at  any  other  sale,  public  or  private,  any  real  estate  upon 
which  such  association  may  have  or  hold  any  mortgage,  judg- 
ment, lien  or  other  incumbrance,  or  in  which  said  association 
may  have  an  interest ;  and  the  real  estate  so  purchased,  or  any 
other  that  such  association  may  hold  or  be  entitled  to  at  the 
passage  of  this  article,  to  sell,  convey,  lease,  or  mortgage,  at 
pleasure,  to  any  person  or  persons  whatever.3 

(j)  Every  such  corporation  shall  terminate,  except  for  the 
purpose  of  settling  its  affairs,  whenever  all  its  shares  shall  have 
been  redeemed,  by  loans  or  advances  thereon,  or  whenever  the 
funds  and  property  of  the  corporation  shall  be  sufficient  to 
pay  upon  the  unredeemed  shares  the  value  thereof,  as  fixed 
by  the  by-laws  of  such  corporation,  filed  in  the  office  of  the 
Secretary  of  State,  as  aforesaid.3 

(k)  No  member  of  any  such  corporation,  who  has  bor- 
rowed money  of  the  same,  shall  be  allowed  to  vote  on  any 
question  affecting  the  claim  of  such  corporation  against  him- 
self.4 

(1)  Every  such  corporation  shall,  semi-annually,  in  the 
months  of  January  and  July,  publish,  in  one  or  more  news- 
papers in  the  city  or  county  where  such  corporation  is  located, 
a  statement,  verified  by  the  oath  of  its  president  or  chairman, 
setting  forth  its  actual  financial  condition,  and  the  amount  of 
its  property  and  liabilities,  under  a  penalty  of  five  hundred 
dollars  to  the  State,  to  be  recovered  by  indictment  against 
the  president,  cashier,  or  directors ;  and  shall  also  deposit  a 
copy  of  said  statement,  verified  as  aforesaid,  in  the  office  of 
the  Secretary  of  State.6 

§  29.  Nebraska.8  (a)  Any  number  of  persons  not  less 
than  five,  may  associate  themselves  together  and  become  a 

1  §  965.  tion,  appellee,®.  Graham,  appellant, 

*  §  966;  Laws  1879,  p.  73,  §  19.  7  Neb.  173,  and  Same  e.  Ben  jam  in 

3  §967.          4§968.           8§969.  and  Benjamin.appellants,  7Neb.l81 

8  General    Statutes  of  Nebraska,  (plea  of  mil  tiel  corporation, — loans. 

1873(158-161).    Decisions:  The  Lin-  — usury,— retroactive    and    rxposi- 

coln  Building  and  Savings  Associa-  tory  statutes, — legislation) ;  Lincoln 


62  THE    LA.W    OF    BUILDING    ASSOCIATIONS.          [cil.   II. 

corporation,  as  is  provided  in  chap.  25,  of  the  Revised  Statutes, 
commencing  at  §  123  of  said  chapter  under  the  title  of  "  Cor- 
porations," for  the  purpose  of  raising  moneys  to  be  loaned 
among  the  members  of  such  corporation,  for  use  in  buying 
lots  or  houses,  or  in  building,  or  repairing,  or  removing  in- 
cumbrances  from  houses;  and  such  corporation  shall  be 
authorized  and  empowered  to  levy,  assess  and  collect  from  its 
members  such  sums  of  money,  by  rates  of  stated  dues,  fines, 
interest  on  loans  advanced,  and  premiums  bid  by  members, 
for  the  right  of  precedence  in  taking  loans,  as  the  corporation, 
by  its  by-laws,  shall  adopt ;  also  to  acquire,  hold,  encumber 
and  convey  all  such  real  estate  and  personal  property  as  may 
be  legitimately  pledged  to  it  on  such  loans,  or  may  otherwise 
be  transferred  to  it  in  the  due  course  of  business  :  Provided, 
that  the  dues,  lines  and  premiums  so  paid  by  members  of 
such  corporation,  although  in  excess  of  twelve  per  cent,  per 
annum,  on  loans  taken  by  them,  shall  not  be  construed  to 
make  the  loans  so  taken  usurious :  And,  provided  also,  that 
no  person  shall  hold  more  than  ten  shares  in  any  such 
association  in  his  own  right,  each  share  not  to  exceed  two 
hundred  dollars.1 

(J)  All  stockholders  of  any  such  association  shall  be 
deemed  and  held  liable  to  any  amount  equal  to  their  stock  sub- 
scribed, or  by  them  at  any  time  held  in  addition  to  said  stock, 
for  the  purpose  of  securing  the  creditors  of  said  association.8 

(c)  All  contracts  and  loans  made  by  any  corporation  or 
association  already  formed  and  now  in  existence  in  this  State, 
under  and  by  virtue  of  said  chap.  25  of  the  Revised  Statutes, 
to  and  with  any  member  of  said  corporation,  and  not  incon- 
sistent with  the  laws  of  this  State,  or  anything  in  this  act 
contained,  are  hereb}7  declared  to  be  legal  and  binding ;  and 
the  securities  given  by  said  members  upon  said  contract  or 
loan,  for  the  security  of  any  loan,  fine  and  forfeiture,  accord- 
ing to  the  terms  of  said  security  or  contract  therein  referred 
to,  and  not  inconsistent  with  any  law  of  this  State  or  in  this 
act  contained,  is  hereby  declared  to  be  legal,  valid  and  bind- 
ing security,  and  contract  in  law  in  the  hands  of  said  corpora- 
Building  and  Savings  Association,  '  PI.  158,  §  1. 
appellee,  v.  Haas  etal.,  appellant,  10  s  PI.  159,  §  2. 
Neb.  581  (mortgage). 


§  30.]  STATUTORY   PROVISIONS  OF  THE  STATES.  63 

tion,  and  with  the  party  making  the  same,  notwithstanding 
a  greater  rate  of  interest  than  twelve  per  cent  per  annum 
may  have  been  contracted  for  or  reserved  in  said  contract.1 

(d)  That,  in  all  corporations  or  associations  now  existing 
and  doing  business  in  this  State,  which  said  corporation  or 
association  have  made  loans  to  any  of  its  members,  and  taken 
securities  therefor  in  pursuance  of  their  constitution  and  by- 
laws, that  any  payment  made  after  the  passage  of  this  act,  by 
any  member  of  said  corporation  of  any  dues,  lines  or  forfeit- 
ures, which  may  be  due  to  said  corporation,  according  to  the 
terms  of  the  contract  between  said  corporation  and  said  mem- 
ber, shall  be  deemed  in  law  a  waiver  of  anything  in  said  con- 
tract or  loan  that  might  be  deemed  usurious  in  the  same 
under  the  laws  of  this  State,  at  the  time  the  same  was  made 
and  securities  given,  and  a  ratification  of  said  loan  or  con- 
tract, and  of  its  present  and  future  legality  between  said  par- 
ties, as  now  existing  under  and  by  virtue  of  this  act.3 

§  30.  New  Jersey.3  (a)  Any  number  of  persons,  not  less 
than  five,  may  associate  and  form  a  company  for  the  purpose 
of  assisting  each  other,  and  all  who  may  afterwards  become 
associated  with  them,  in  acquiring  real  estate,  making  im- 
provements thereon  and  removing  incumbrances  therefrom, 

1  PL  160,  §  3.  *  PI.  161,  §  4.  Mechanics'  Building  and  Loan  A  MO- 

3  Revision  of  New  Jersey,  1709-  ciation,  2  C.  E.  Gr.  ,497  (marshalling 

1877,  pp.  92,  93;  Act  April  9,  1875  of  assets);  Red  Bank  Association  v. 

(revision).     See  also  P.  L.  1849.  p.  Patterson,  12  C.  E.  Gr.,  223  (mar- 

227;  1852,  83;  1855,  423;  1869,  40;  shalling of  assets) ;  The  Washington 

Amendments  and  Supplements,  p.  Building  and  Loan    Association  v. 

1272;  Feb.  29,  1876;  Mar.  15, 1876;  Beaghen,  12  C.  E.  Gr.,  99  (S.  P.); 

April  21,  1876.    See  also  Act  Mar.  Philippsburg     Mutual    Loan     nnd 

7.  1878,  Ch.  50,  p.  61.    Decisions:  Building  Association  v.   Hawk,  12 

Franklin    Building  Association   v.  C.  E.   Gr.,  355  (S.  P.);    Reilly   e. 

Marsh,  5  Dutch.  225  (loans, — mort-  Mayer,  1  Beas.,  55  (S.  T.  judgment, 

gage, — plea  of  nul  tiel  corporation,  — creditors);  Union  Building  Loan 

— misnomer, — charge  for  search, —  Association    v.    Masonic     Hall,     2 

usury, — premature  winding  up, — re-  Stew.,  389  (security, — loans, — dues); 

demption);  Somerset  County  Build-  Tradesmen's  Building   Association 

ing,  Loan  and  Savings  Association  v.  Thompson,  4  Stew.,  536;5ld.,133 

v.  Vandervere,  3  Stock.  282  (mort-  (mortgage, — substitution);  Ciii/'ms' 

gage  of  husband  and  wife, — loan);  Loan  Association  v.  Lyon,  2  Stew., 

Mechanics'  Building  and  Loan  As-  110  (waste  of  funds. — liability  of  of- 

sociation  v.  Conover,  1  McCart.  219  fleers)  ;Clarkville  Building  and  Loan 

(loans);  S.  C.  uom.  Herbert  v.  The  Association  c.  Stephens,  11  C.E.Gr. 


64  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  II. 

by  the  payment  of  periodical  instalments ;  and  for  the  further 
purpose  of  accumulating  a  fund  to  be  returned  to  its  mem- 
bers who  do  not  obtain  advances,  for  purposes  above  men- 
tioned,  when  the  funds  of  such  association  shall  amount  to  a 
certain  sum  per  share,  to  be  specified  in  the  articles  of  incor- 
poration.1 

Any  such  persons  shall  sign  a  certificate,  setting  forth 
that  they  may  have  formed  such  an  association  under  the  pro- 
visions of  this  act,  and  the  name  adopted  for  such  association, 
and  the  city,  borough  or  township  where  it  is  to  be  located 
and  its  business  transacted,  and  who  shall  cause  the  same  to 
be  delivered  to  the  clerk  of  the  county  which  embraces  the 
place  of  its  location,  thereupon,  together  with  all  who  may 
afterwards  become  members,  their  successors  and  associates, 
shall  be  a  body  corporate  and  politic  in  law,  with  all  the  pow- 
ers mentioned  in  the  first  section  of  the  act  entitled  "  An  act 
concerning  corporations." " 

(c)  The  said  clerk  shall  immediately  file  said  certificate, 
and  record  the  same  in  a  book  to  be  kept  for  that  purpose, 
for  which  he  shall  be  entitled  to  receive  the  sum  of  twenty- 
five  cents.3 

(d)  Parents  and  guardians  may  take  and  hold  shares  in 
such  associations  in  behalf  of  their  minor  children  or  wards, 
and  trustees  in  behalf  of  married  women,  and  may  act  in  such 
associations  in  behalf  of  those  they  represent.4 

(e)  The  right  of  membership  in  all  associations  formed 
under  this  act,  shall  consist  in  the  periodical  payment  of  such 
sum  of  money,  at  such  times,  and  subject  to  such  penalties  as 

351     (negligence,— fines,— loans,—  Loan  Association  v.  Hammel  et  al., 

usury);  Citizens'  Loan  Association  Id.  78 (S.  P.);  State,  Galbraith,  pros., 

0.  Nugent,  11  Vroom,  215  (sureties  v.  People's  Building  and  Loan  As- 

on  officer's  bond);  State,  "Washing-  sociation  of  Camden,  Id.  389  (rem- 

ton  Building  and  Loan  Association,  edy  for  refusal  to  transfer  shares  is 

pros.,  v.  Creveling,  10  Vroom,  465,  at  law,  not  by  mandamus);  Millville 

11  Vroom,  192;  and  Same  v.  Horn-  Mutual  Marine  and  Fire  Insurance 

backer,  12  Vroom,  519,  13  Vroom,  Co.  v.  Mechanics'  and  Workingmen's 

635    (taxation);    People's  Building  Building  and  Loan  Association,  Id. 

and   Loan  Association  of  Camden  652  (agency, — agent's  contract). 

«.  Wroth  et  al.,  14  Vroom,  70  (ex-  >  Rev.  of  N.  J.,  1709-1877,  p.  92, 

tent  of  liability  of  sureties  on  treas-  93,  1. 

urer's  bond, — dues  and  fines  to  be  2  P.  92,  2. 

paid  in  cash);  Mutual  Building  and  3  P.  92.  3.                 *  P.  93.  4 


§30.]  STATUTORY    PHOVIS1ONS   OF  THE   STATES.  65 

shall  be  determined  by  the  constitution  adopted  and  filed  as 
aforesaid,  or  in  the  payment  of  a  principal  sum  specified  in 
such  constitution  to  be  repaid  by  the  company,  in  such  way 
and  manner  as  shall  therein  be  designated,  with  interest  not 
exceeding  seven  per  cent  per  annum.1 

(/}  The  funds  of  every  association  formed  under  this  act 
shall  be  invested  in  the  purchase  of  lands  or  building  lots, 
and  erecting  buildings  and  improvements  thereon,  or  in  the 
purchase  of  lots  and  houses,  already  built,  which  lands,  dwell- 
ings and  improvements  shall  be  sold  to  the  members  of  such 
association,  payable  in  the  shares  of  the  company,  or  in 
periodical  instalments  for  a  period  such  as  shall  be  agreed 
upon  and  designated  in  their  constitution,  and  which  shall 
not  exceed  the  term  of  twenty  years ;  at  the  expiration  of 
which  time  the  lands,  dwellings  and  improvements  so  sold 
and  conveyed  to  the  members  of  such  associations,  shall  be- 
come the  property  of  the  grantees,  discharged  from  all  further 
payments  and  clear  of  all  incumbrances,  or  in  loans  to  mem- 
bers on  mortgage  of  real  or  personal  estate,  payable  in  shares 
of  said  company,  or  by  such  periodical  instalments ;  or  in  the 
redemption  of  shares,  or  in  all  or  any  of  these  modes.3 

(g)  It  shall  be  lawful  for  married  women  and  minors  to 
hold  shares  in  any  associations  formed  under  this  act :  Pro- 
vided, said  shares  are  paid  for  out  of  the  earnings  of  said 
married  women  and  minor  children,  or  with  money  given  to 
them  by  others  than  the  husbands  of  said  married  women,  or 
the  male  parents  of  minor  children.3 

(//)  Every  company  formed  under  this  act  shall  adopt  a 
constitution  which  shall  embrace  all  the  provisions  of  the; 
foregoing  sections,  and  such  articles  for  their  government  and! 
the  management  of  their  business  as  they  shall  deem  proper: 
Provided,  the  same  shall  not  be  inconsistent  with  this  act  or 
with  the  act  concerning  corporations  aforesaid,  and  shall  not 
contravene  the  laws  or  constitution  of  this  State  or  the  United 
States ;  and  may  alter  and  amend  the  same,  from  time  to 
time,  in  the  manner  therein  provided ;  the  investments  of 
every  such  association  shall  be  made  either  in  loans  to,  or  in 
redemption  of  the  shares  of,  or  in  purchasing  lots  and  erecting 
dwellings  for  the  members,  or  in  all  of  said  modes,  or  in  such 
1  P  93,  5.  •  P.  93,  6.  3  P.  93,  7. 


66  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.   II. 

other  ways  as  the  constitution  of  the  particular  association 
shall  provide ;  and  no  premium  given  for  priority  of  loan  or 
acquisition  of  a  building  or  discount  given  on  the  redemption 
of  shares,  shall  be  deemed  usurious.1 

(t)  Every  company  formed  under  this  act  shall  furnish  to 
the  Secretary  of  State,  if  required,  an  annual  statement  of  its 
business  and  condition  of  the  company,  which  shall  be  duly 
attested,  under  oath  or  affirmation,  by  the  proper  officers  of 
said  company.* 

(j)  Any  company  formed  in  pursuance  of  this  act  shall 
have  power  to  dispose  of  or  sell  any  lands,  tenements,  to  others 
than  those  constituting  the  said  company,  on  terms  according 
to  and  not  inconsistent  with  the  constitution  of  such  company ; 
and  the  purchasers  of  said  tenements  so  sold  or  disposed  shall 
not  thereby  be  constituted  members  of  any  such  company 
formed  as  aforesaid.' 

(k)  The  original  associates,  or  those  formed  into  com- 
panies under  this  act,  or  their  assigns,  and  who  shall  have 
actually  created  a  fund,  and  expended  the  same  in  acquiring 
lands  and  tenements,  shall  be  alone  deemed  to  have  and  to 
exercise  the  right  of  members  in  said  companies.4 

(I)  All  deeds  of  conveyance  of  lands  or  tenements,  granted 
by  any  company  formed  in  pursuance  of  this  act,  shall  be  held 
to  be  valid  and  binding,  with  all  the  restrictive  clauses  as 
against  nuisances,  or  what  may  be  deemed  nuisances  by  the 
constitutions  of  any  companies  so  formed,  as  aforesaid,  unless 
the  same  are  in  violation  of  the  constitution  of  this  State  or 
the  laws  thereof,  or  of  the  United  States.6 

(ra)  All  matters  not  herein  provided  for  shall  be  regulated 
by  the  constitution  and  by-laws  of  said  associations,  respect- 
ively.' 

(n)  The  legislature  may  at  any  time  alter,  amend,  or  re- 
peal the  charter  of  any  association  created  under  this  act.7 

(0)  Companies  organized  under  this  act  may  divide  or  par- 
tition the  lands  by  them  owned  among  their  members  by  lot 
in  such  way  as  to  them  may  seem  most  advantageous,  and  all 

1  Amendments  and  supplements,  ,               4  P.  93,  11. 

p.  1272;  Feb.  29,  1876.  6  P.  93,  12. 

»  Rev.  of  N.  J.,  1,  p.  93,  9.  •  P.  93,  13. 

3  P.  93,  10.  '  P.  93,  14. 


§  31.]  STATUTORY   PROVISIONS  OF  THE   STATES.  67 

conveyances  made  in  pursuance  of  such  allotments  shall,  for 
all  purposes,  be  valid  and  effectual.1 

(p)  Nothing  in  this  act  shall  be  construed  to  prevent  any 
association  formed  under  its  provisions  from  taking  a  pre- 
mium for  priority  of  loan  or  acquisition  of  real  estate,  or  dis- 
count on  redemption  of  shares ;  and  no  premium  or  discount 
so  taken  for  such  purpose  shall  be  deemed  usurious.2 

(2)  Any  mutual  loan,  homestead  or  building  association 
heretofore  organized  under  the  laws  of  this  State,  shall  have 
power  to  meet  and  reorganize,  and  provide  for  the  transac- 
tion of  their  future  business  under  the  provisions  of  the  act 
to  which  this  is  a  supplement,  by  giving  notice  thereof  by 
advertisement  for  four  weeks  successively,  at  least  once  in 
each  week,  in  a  newspaper  published  or  circulating  where 
such  company  or  association  is  located,  which  advertisement 
shall  be  signed  by  the  secretary,  and  state  the  time,  place  and 
purpose  for  which  such  meeting  is  called,  and  also  by  sending 
a  written  or  printed  notice  to  each  stockholder,  containing  the 
same  information ;  when  so  assembled  they  shall  have  power, 
by  a  two  thirds  vote  of  the  stockholders  present,  to  change, 
alter,  or  repeal  their  present  constitution  and  by-laws,  and  to 
adopt  such  new  constitution  and  by-laws  as  they  may  deem 
needful  for  their  future  government :  Provided,  the  same  do 
not  conflict  with  the  laws  or  constitution  of  this  State  or  of 
the  United  States.3 

§  31.  New  York.*  (a)  Any  number  of  persons,  not  less 
than  nine,  may  associate  and  form  an  incorporated  company 

1  P.  93,  15;  Act  Feb.  10, 1869  (P.  64,  §§  1,  2,  4,  5,  6;  1878,  Ch.  965. 

L.  1869,  p.  40).  See  also  Rev.  Stat.  of  N.  Y.,  1882 

*  Act  April  21,  1876.  (Banks  &  Brothers),  pp.  1762-1767. 

8  Act  Mar.  15,  1876.— "All  the  Decisions:  Hamilton  Building  As- 
real  and  personal  estate  of  every  cor-  sociation  v.  Reynolds,  5  Duer,  671 
poration  incorporated  by  any  act  of  (mortgage) ;  Second  American 
legislature,  or  by  the  filing  of  a  cer-  Building  Association  v.  Platt  et  al., 
tiflcate,  or  otherwise  under  any  gen-  5  Duer,  675  (pleading);  Mechanics' 
eral  law  of  this  State,  shall  be  taxed  Building  Association  v.  Stevens  et 
the  same  as  the  real  and  personal  es-  al.,  5  Duer,  676  (plea  of  nul  tiel  cor- 
tate  of  an  individual."  Act  Mar.  7,  poration);  The  Citizens'  Mutual 
1878,  C.  50,  p.  61.  Loan  and  Accumulating  Fund  Asso- 

4  Revised  Statutes  of  New  York,  ciation  v.  Webster,  25  Barb.  263 

1876,  Tit.  xxi.  §§  1-22,  24-26,  p.  700  (loans,— usury,—  fines);  Second  New 

*eqq.;  Laws  1851,  Ch.  122;  1875,  Ch.  York  Building  Association  t.Gallier, 


68  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

for  the  purpose  of  accumulating  a  fund  for  the  purchase  of 
real  estate,  the  erection  of  buildings,  or  the  making  of  other 
improvements  on  lands,  or  to  pay  off  incumbrances  thereon, 
or  to  aid  its  members  in  acquiring  real  estate,  making  im- 
provements thereon,  or  removing  incumbrances  therefrom; 
and  for  the  further  purpose  of  accumulating  a  fund  to  be  re- 
turned to  its  members,  who  do  not  obtain  advances  as  above 
mentioned,  when  the  funds  of  such  association  shall  amount  tx> 
a  certain  sum  per  share,  to  be  specified  in  the  articles  of  asso- 
ciation.1 

(b)  Such  persons  shall  severally  subscribe  articles  of  asso- 
ciation, in  which  shall  be  set  forth  the  name  of  the  corpora- 
tion, the  time  of  its  regular  meetings,  and  how  special  meet- 
ings may  be  called,  and  what  shall  constitute  a  quorum  to- 
transact  business  at  meetings ;  the  qualifications  of  members, 
and  how  constituted;  what  officers,  trustees  and  attorney 
there  shall  be,  and  how  and  when  chosen,  and  their  duties,  and 
how  removed  or  suspended  from  office ;  the  entrance  fee  of 
new  members  and  new  shares ;  the  monthly  or  weekly  dues 
per  share ;  the  redemption  fee  on  shares  on  which  advance* 
shall  be  made,  and  fees  to  be  paid  on  the  transfer  of  shares ; 
the  fines  and  penalties  for  nonpayment  of  dues  or  fees,  or 
other  violation  of  the  articles  of  association ;  the  manner  of 
redemption  of  shares  by  advances  made  thereon ;  the  mort- 
gaged security  to  be  taken  on  such  advances,  and  how  the 
same  may  be  redeemed  or  changed ;  the  manner  of  the  trans- 
fer or  withdrawal  of  shares ;  the  manner  of  investing  funds- 
not  required  for  advances  on  shares;  the  qualifications  of 
voters  at  the  meetings,  and  the  mode  of  voting ;  the  ultimate 
amount  to  be  paid  to  the  owners  of  unredeemed  shares ;  the 
manner  of  altering  or  amending  the  articles  of  association, 
and  such  other  provisions  as  shall  be  necessary  for  the  eifec- 

cited  in  preceding  case  (fines);  Mel-  (plea of  nultiel corporation, — execu- 

ville  v.  The  American  Benefit  Build-  tion  of  certificate  of  corporation); 

ing  Association  et  al.,  33  Barb.  103  Franklin  Building  Association  t.Ma- 

(unincorporated  building    associa-  ther,  4  Abb.  Pr.,    274  (mortgage); 

tions. — usury);   City  Building  and  Wetterwulgh  v.  The  Knickerbocker 

Loan  Co.  v.  Fatty,  1  Abb.  App.  Dec.,  Building    Association,  2  Bos.   881 

347 (loans, — usury);  Second Manhat-  (withdrawal) ;  Remington  r. King,  11 

tan  Building  Association  t?.  Hayes.  Abb.  Pr.,  278  (personal  liability, — 

4  Abb.  App.  Dec.,  183;  2Keyes,  192  offset).     '  Rev.  St.  Tit.  xxi  ,  §  1. 


§  31.]  STATUTORY    PROVISIONS  OF  THE   STATES.  G'J 

live  and  convenient  transaction  of  the  business  thereof :  Pro- 
vided, that  the  same  shall  not  in  any  respect  contravene  the 
constitution  or  laws  of  this  State.1 

(c)  A  true  copy  of  such  articles,  signed  by  the  officers  of 
the  association,  together  with  a  statement  showing  when  the 
association  was  organized,  and  its  place  of  business,  the  names  of 
the  officers  and  trustees  at  the  time  of  making  such  statement, 
which  shall  be  verified  by  oath  or  affirmation  before  any  of 
ficer  authorized  to  take  affidavits,  to  be  used  in  courts  of  justice, 
shall  be  filed  in  the  office  of  the  clerk  of  the  county  in  which 
such  association  shall  transact  its  business ;  and  thereupon  the 
persons  who  have  subscribed  the  articles  of  association,  and  such 
other  persons  as  shall  become  members,  and  their  successors, 
shall  be  a  body  coiporate  by  the  name  specified  in  such  arti- 
cles, and  shall  possess  the  powers  and  privileges,  and  be  sub- 
ject to  the  provisions  of  title  third  of  chapter  eighteen  of  the 
first  part  of  the  Revised  Statutes,  so  far  as  those  provisions 
are  consistent  with  the  provisions  of  this  act,  and  they  shall 
by  their  corporate  name  be  capable  in  law  of  purchasing,  hold- 
ing and  conveying   any  real   and  personal   estate  whatever, 
which  may  be  necessary  to  enable  such  company  to  carry  out 
their  operation  named  in  such  certificate.8 

(d)  It  shall  be  lawful  for  the  trustees  to  call  in  and  de- 
mand from  the  stockholders  respectively,  all  such  sums  of 
money  by  them  subscribed,  at  such  times  and  in  such  pay- 
ments or  instalments  as  the  articles  of  association  prescribe, 
under  penalty  of  forfeiting  the  shares  of  stock  subscribed  for 
and  all  previous  payments  made  thereon,  if  payment  shall  not 
be  made  by  the  stockholder  within  sixty  days  after  a  personal 
demand,  or  notice  requiring  such  payment  shall  have  been 
published  for  six  successive  weeks  in  the  newspaper  nearest 
the  place  of  business  of  the  company.' 

(e)  All   corporations  formed  under   this    act   shall  have 
power  to  borrow  money  for  temporary  purposes  not  inconsist- 
ent with  the  objects  of  their  organization ;  but  no  loan  for  such 
purposes  shall  have  a  longer  duration  than   two  years,  nor 
shall  such  indebtedness  exceed  at  any  one  time  one  fourth  of 
the  aggregate  amount  of  the  shares  and  parts  of  shares,  and 
the  income  thereof,  actually  paid  in  and  received/ 

'§2.  »§3.  »§4.  4£5. 


70  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

(f)  Parents  and  guardians  may  take  and  hold  shares  in 
such  association,  in  behalf  and  for  the  use  of  their  minor  chil- 
dren or  wards,  provided  the  cost  of  such  shares  be  defrayed 
from  the  personal  earnings  of  such  minor  children  or  wards, 
or  by  gifts  from  persons  other  than  their  male  parents  ;  mar- 
ried women  may  take  and  hold  shares,  provided  the  cost  of 
such  shares  be  defrayed  from  their  personal  earnings,  the  per- 
sonal earnings  of  their  children  voluntarily  bestowed  for  the 
purpose,  or  from  property  bequeathed  or  given  to  them  by 
persons  other  than  their  husbands.1 

(g)  The  trustees  of  any  association,  formed  under  the  pro- 
visions of  this  act,  may  from  time  to  time  declare  dividends 
from  the  earnings  of  the  association,  payable  in  such  manner 
as  may  be  provided  in  the  articles  of  association ;  but  no  div- 
idend shall  be  declared  except  from  the  earnings  of  the  asso- 
ciation, and  if  the  said  trustees  shall  declare  and  pay  any  div- 
idend, when  the  company  is  insolvent,  or  any  dividend  the 
payment  of  which  would  render  it  insolvent,  they  shall  be 
jointly  and  severally  liable,  to  the  extent  of  the  dividend  so 
declared  and  paid,  for  all  the  debts  of  the  association,  then  ex- 
isting, or  that  shall  be  thereafter  contracted,  while  they  shall 
respectively  continue  in  office  :  Provided,  that  if  any  of  the 
trustees  shall  object  to  the  declaring  of  such  dividend,  or  to 
the  payment  of  the  same,  and  shall  at  any  time  before  the 
time  fixed  for  the  payment  thereof,  file  a  certificate  of  his  ob- 
jection in  writing  with  the  clerk  of  the  company,  and  with 
the  clerk  of  the  county,  he  shall  be  exempt  from  the  liability. 
But  no  trustee  who  shall  be  present  at  any  meeting  when 
such  dividend  shall  be  declared,  shall  be  exempt  from  such 
liability,  unless  he  shall  then  and  there  object  to  the  declara- 
tion or  payment  of  such  dividend,  and  shall  also  procure  hie 
objection  to  be  noted  in  the  book  of  minutes  of  such  associa- 
tion.   No  holder  of  redeemed  shares  shall  claim  to  be  exempt 
from  making  the  monthly  or  stated  payments  provided  in 
the  articles  of  association  upon  the  ground  that,  by  reason  of 
losses  or  otherwise,  the  association  has  continued  longer  than 
was  originally  anticipated,  whereby  the  payments  made  on 
such  shares  may  amount  to  more  than  the  amount  originally 
advanced,  with  legal  interest  thereon ;  nor  shall  the  imposi- 

'§6. 


§  31.]  STATUTORY   PROVISIONS  OF  THE   STATES.  71 

tion  of  fines  for  the  nonpayment  of  dues  or  fees,  or  other  vio- 
lation of  the  articles  of  association,  nor  the  making  of  any 
monthly  payment  required  by  such  articles,  or  of  any  pre- 
mium for  loans  made  to  members,  be  deemed  a  violation  of 
the  provisions  of  any  statute  against  usury.1 

(A)  Any  existing  association  formed  for  the  purposes 
mentioned  in  the  first  section  of  this  act,  may,  on  the  vote  of 
a  majority  of  the  voting  shares,  at  any  regular  meeting  after 
the  passage  of  this  act,  become  entitled  to  the  benefit  of  this 
act,  on  complying  with  the  second  and  third  sections  thereof, 
unless  the  second  section  has  heretofore  been  complied  with ; 
in  which  case  it  shall  be  necessary  to  comply  only  with  the 
third  section.' 

(i)  No  officer,  trustee,  attorney,  agent  or  servant  of  any 
association  hereby  incorporated,  shall  use  or  dispose  of  any 
part  of  the  funds  of  such  association,  or  assign,  transfer,  can- 
cel, deliver  up,  or  acknowledge  satisfaction  of  any  bond,  mort- 
gage, or  other  written  instrument  belonging  to  such  associa- 
tion, unless  duly  authorized,  or  be  guilty  of  any  fraud  in  the 
performance  of  his  duties ;  and  every  person  guilty  of  a  vio- 
lation of  this  section  shall  be  liable  civilly  to  the  party  in- 
jured, to  the  extent  of  the  damage  thereby  incurred,  and  shall 
also  be  liable  to  an  indictment  for  a  misdemeanor,  punishable 
by  fine  or  imprisonment,  or  both,  in  the  discretion  of  the 
court  by  which  he  shall  be  tried.3 

(f)  Each  association  formed  under  the  provisions  of  this 
act,  shall,  at  the  close  of  the  first  year's  operations,  and  annu 
ally  thereafter  at  the  same  period,  publish  in  at  least  two 
newspapers,  published  where  their  place  of  business  may  be 
located,  or  if  no  newspaper  shall  be  published  in  such  place, 
then  in  any  two  newspapers  published  nearest  such  place,  a 
concise  statement,  verified  on  the  oath  of  its  president  and 
secretary,  showing  the  actual  financial  condition  of  the  a.-so- 
ciation,  and  the  amount  of  its  property  and  liabilities,  speci- 
fying the  same  particularly.4 

(fc)  All  stockholders  of  any  association  formed  under  this 

act,  shall  be  individually  liable  to  creditors  of  said  association, 

to  an  amount  equal  to  the  stock  held  by  them  respectively, 

for  all  debts  contracted  by  such  association.     The  directors,  or 

1  §  7;  Laws  1875,  Ch.  564.  g  1.  »  §  8.  s  $  9.  4  §  10. 


72  THE   LAW   OF   BUILDING  ASSOCIATIONS.          [Cll.   II. 

other  officers  of  associations  formed  under  this  act,  shall  be 
personally  liable  for  any  fraudulent  use,  disposition  or  invest- 
ment of  any  moneys  or  property  belonging  to  such  associa- 
tion, or  for  any  loss  which  shall  be  incurred  by  any  invest- 
ment made  by  such  directors  or  other  officers  other  than  such 
as  are  mentioned  in,  and  authorized  by  this  act ;  but  no  direc- 
tor or  other  officer  shall  be  liable  as  aforesaid,  except  he 
authorized,  sanctioned,  approved,  or  made  such  fraudulent 
use,  disposition  or  investment  as  aforesaid.1 

(I)  No  person  holding  stock  in  any  such  company,  or  ex- 
ecutor, administrator,  guardian,  or  trustee,  and  no  person  hold- 
ing such  stock  as  collateral  security,  shall  be  personally  subject 
to  any  liability  as  stockholder  of  such  company,  but  the  person 
pledging  such  stock  shall  be  considered  as  holding  the  same, 
and  shall  be  liable  as  stockholder  accordingly ;  and  the  estate 
and  funds  in  the  hands  of  such  executor,  administrator,  guar- 
dian, or  trustee  shall  be  liable  in  like  manner  and  to  the  same 
extent  as  the  testator  or  intestate,  or  the  ward  or  person  in- 
terested in  such  trust  fund  would  have  been  if  he  had  been 
living,  and  competent  to  act,  and  hold  the  same  stock  in  his 
own  name." 

(m)  Every  such  executor,  administrator,  guardian,  or  trustee 
shall  represent  the  share  of  stock  in  his  hands,  at  all  meetings 
of  the  company,  and  may  vote  accordingly  as  a  stockholder : 
and  every  person  who  shall  pledge  his  stock  as  aforesaid  may 
nevertheless  represent  the  same  at  all  meetings,  voting  as  a 
stockholder.3 

(ri)  In  case  it  happen,  at  any  time,  that  an  election  of  offi- 
cers is  not  made  on  the  day  designated  by  the  by-laws  of  said 
company,  when  it  ought  to  have  been  made,  the  company  for 
that  reason  shall  not  be  dissolved ;  but  it  shall  be  lawful  on 
any  other  day  to  hold  an  election  for  trustees  in  the  manner 
prescribed  by  the  by-laws ;  and  all  acts  of  trustees  shall  be 
valid  and  binding  against  such  company  until  their  successors 
are  elected.4 

(<?)  The  legislature  may  at  any  time  alter,  repeal,  or  amend 

this  act,  or  may  annul  or  repeal  any  incorporation  formed  or 

created  under  this  act ;  but  such  repeal  or  amendment  shall 

not,  nor  shall  the  dissolution  of  any  such  company,  take  away 

'§11.  '§12.  » §13.  « §14. 


§  31.]  STATUTORY   PROVISIONS  OF  THE  STATES.  73 

or  impair  any  remedy  given  against  any  such  corporation,  its 
stockholders  or  officers  for  any  liability  which  shall  have  been 
previously  incurred.1 

(p)  Any  company  which  may  be  formed  under  this  act 
may  increase  or  diminish  its  capital  stock,  by  complying  with 
the  provisions  of  this  act,  to  any  amount  that  may  be  deemed 
sufficient  and  proper  for  the  purposes  of  the  corporation. 
But  before  any  corporation  shall  be  entitled  to  diminish  the 
amount  of  its  capital  stock,  if  the  amount  of  its  liabilities  ex- 
ceed the  amount  of  capital  to  which  it  is  proposed  to  be  re- 
duced, such  amount  of  liabilities  shall  be  satisfied,  and  reduced, 
so  as  not  to  exceed  such  diminished  amount  of  capital.' 

(^)  Whenever  any  company  shall  desire  to  call  a  meeting 
of  the  stockholders,  for  the  purpose  of  increasing  or  dimin- 
ishing the  amount  of  its  capital  stock,  it  shall  be  the  duty  of 
the  trustees  to  publish  a  notice,  signed  by  at  least  a  majority 
of  them,  in  a  newspaper  in  the  county,  if  any  be  published 
therein,  at  least  three  successive  weeks,  and  to  deposit  a 
written  or  printed  copy  thereof  in  the  post-office,  addressed 
to  each  stockholder  at  his  usual  place  of  residence,  at  least 
three  weeks  previous  to  the  day  specified  for  holding  such 
meeting,  specifying  the  object  of  such  meeting,  the  time  and 
place,  when  and  where  to  be  held,  and  the  amount  to  which 
it  shall  be  proposed  to  increase  or  diminish  the  capital,  and  a 
vote  of  at  least  two  thirds  of  all  the  shares  of  stock  shall  be 
necessary  to  an  increase  or  diminution  of  the  amount  of  its 
capital  stock.3 

(r)  If  at  any  time  and  place  specified  in  the  notice  pro- 
vided for  in  the  preceding  section  of  this  act,  stockholders 
shall  appear  in  person  or  by  proxy  in  numbers  representing 
not  less  than  two  thirds  of  all  the  shares  of  stock  of  the  cor- 
poration, they  shall  organize  by  choosing  one  of  the  trustees 
chairman  of  the  meeting,  and  also  a  suitable  person  for  secre- 
tary, and  proceed  to  a  vote  of  those  present  in  person  or  by 
proxy;  and  if  on  canvassing  the  votes,  it  appear,  that  a  suffi- 
cient number  of  votes  has  been  given  in  favor  of  increasing 
or  diminishing  the  amount  of  capital,  a  certificate  of  the  pro- 
ceedings showing  the  compliance  with  the  provisions  of  this 
act,  the  amount  of  capital  actually  paid  in,  the  whole  amount 
1  §  15.  « §  16.  3  £  17. 


74  THE  LAW  OF  BUILDING  ASSOCIATIONS.          [CH.  IL 

of  debts  and  liabilities  of  the  company,  and  the  amount  to 
which  the  capital  shall  be  increased  or  diminished,  shall  be 
made  out,  signed  and  verified  by  the  affidavit  of  the  chair- 
man, and  countersigned  by  the  secretary ;  such  certificate 
shall  be  acknowledged  by  the  chairman,  and  filed  as  required 
by  the  first  section  of  this  act ;  and  when  so  filed  the  capital 
stock  of  such  corporation  shall  be  increased  or  diminished  to 
the  amount  specified  in  certificate.1 

(s)  The  shares  held  by  the  members  of  all  associations 
incorporated  under  the  provisions  of  this  act,  shall  be  exempt 
from  sale  or  execution  for  debt,  to  an  extent  not  exceeding 
six  hundred  dollars  in  such  shares,  at  their  par  value.8 

(t)  No  loan  made  by  such  association  to  its  members  may 
exceed  the  par  value  of  the  stock  to  which  such  member  may 
have  subscribed." 

(u)  The  copy  of  any  certificate  of  incorporation  filed  in 
pursuance  of  this  act,  certified  by  the  county  clerk  or  his 
deputy,  to  be  a  true  copy,  and  of  the  whole  of  such  certificate, 
shall  be  received  in  all  courts  and  places  as  presumptive  legal 
evidence  of  the  facts  therein  stated.4 

(v)  Every  corporation,  organized  under  the  provisions  of 
said  act,  and  every  corporation  heretofore  organized  under 
the  laws  of  this  State  for  purposes  similar  to  those  provided 
for  in  said  act,  shall  annually  make  a  full  report  in  writing  of 
the  affairs  and  condition  of  said  corporation,  on  the  first  day 
of  January  of  each  year,  to  the  superintendent  of  the  banking 
department,  in  such  form,  and  by  such  officers  of  the  corpo- 
ration, as  the  said  superintendent  may  designate,  which  report 
shall  be  in  place  of  any  report  which  any  such  corporation 
may  now  be  required  to  make  to  the  Supreme  Court,  the 
comptroller,  or  otherwise.  Such  report  shall  be  verified  by 
the  oath  or  affirmation  of  the  officers  making  such  report ; 
and  any  wilful  swearing  with  regard  to  such  report,  shall  be 
deemed  perjury,  and  be  subject  to  the  prosecutions  and  pun- 
ishments prescribed  by  law  for  that  offence.  Every  such 
report  shall  be  made  within  twenty  days  after  the  day  to 
which  it  relates,  and  shall  be  in  such  form,  and  contain  such 
statements,  returns  and  information  as  to  the  affairs,  business, 
condition,  obligations  and  resources  of  such  corporation,  as  the 
1  ?  18.  *  §  19.  3  g  20.  4  §  21. 


§  31.]  STATUTORY    PROVISIONS   OF  THE   STATES.  75 

said  superintendent  may,  from  time  to  time,  prescribe  and  re- 
quire. And  the  said  superintendent  may,  if  he  be  of  opinion 
that  it  is  desirable,  require  that  a  like  report,  either  wholly  or 
in  part,  be  made  to  him  at  any  time,  by  any  such  corporation, 
within  such  period  as  he  may  designate.1 

(w)  Whenever  the  stockholders  of  any  corporation  organ- 
ized under  the  provisions  of  this  act  shall  deem  that  a  person- 
al examination  by  said  superintendent  of  the  affairs  of  said 
corporation  is  desirable  or  necessary,  it  shall  be  the  duty  of 
said  superintendent,  on  the  request  in  writing,  signed  by  not 
less  than  live  of  the  stockholders  of  said  corporation,  that 
such  examination  be  made,  either  by  himself  or  by  some  per- 
son duly  appointed  by  him  for  that  purpose,  make  a  full  and 
careful  examination  of  the  affairs  of  said  corporation  and 
make  his  report  thereon  as  herein  provided.  The  person 
making  such  examination  shall  have  power  to  administer 
oaths  and  take  all  testimony  by  him  deemed  necessary  and 
proper,  and  to  compel  the  attendance  of  witnesses  and  the 
production  of  books  and  papers,  by  like  process  and  in  the 
same  manner  as  now  provided  by  law,  to  procure  the  attend- 
ance of  witnesses  and  the  production  of  books  and  papers  in 
the  courts  of  record  of  this  State.  The  expense  of  such  ex- 
amination shall  be  borne  by  said  corporation,  but  no  charge 
shall  be  made  therefor,  when  the  examination  is  made  by  said 
superintendent  personally  or  by  one  of  the  salaried  employees 
of  his  department,  except  for  necessary  travelling  and  other 
expenses ;  whenever  said  superintendent  shall  appoint  any 
person  other  than  a  salaried  officer  in  his  department  to  make 
such  examination,  the  amount  charged  therefor  shall  not  ex- 
ceed the  sum  of  ten  dollars  per  day  for  the  time  actually  ex- 
pended in  making  the  same,  and  the  actual  and  necessary 
expenses  as  herein  provided." 

(a?)  On  every  such  examination,  inquiry  shall  be  made  as 
to  the.  nature  and  resources  of  the  corporation  generally,  t^ie 
mode  of  conducting  and  managing  its  affairs,  the  action  of  its 
directors  or  trustees,  the  investment  of  its  funds,  the  satVty 
and  prudence  of  its  management,  the  security  afforded  to 
those  by  whom  its  engagements  are  held,  whether  the  re- 

1  §  22;  Laws  1875,  Ch.  564.  §  2. 

•  Laws  1878,  Ch.  96  (p.  103).  Act  April  1.  1878. 


76  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

quirements  of  its  charter  and  of  law  have  been  complied  with 
in  the  administration  of  its  affairs.1 

(y)  If  it  shall  appear  to  said  superintendent,  from  the  re- 
port of  any  such  corporation,  or  from  any  examination  made 
by  him,  that  any  corporation  has  committed  a  violation  of 
its  charter  or  of  law,  or  is  conducting  business  in  an  unsafe 
and  unauthorized  manner,  he  shall  by  an  order,  under  his 
hand  and  seal  of  office,  addressed  to  such  corporation,  diivrt 
the  discontinuance  of  such  illegal  or  unsafe  practices,  and 
conformity  with  the  requirements  of  its  charter  and  of  law, 
and  with  safety  and  security  in  its  transactions ;  and  whun- 
over  any  corporation  shall  refuse  or  neglect  to  make  such  re- 
port, or  comply  with  such  order,  or  whenever  it  shall  appear 
to  said  superintendent  that  it  is  unsafe  or  inexpedient  for  any 
corporation  to  continue  to  transact  business,  he  shall  com- 
municate the  facts  to  the  attorney-general,  who  shall  there- 
upon be  authorized  to  institute  such  proceedings  against  any 
such  corporation,  as  are  now,  or  may  be  hereafter  provided 
for  by  law  in  the  case  of  insolvent  corporations,  or  such  other 
proceeding  as  the  nature  of  the  case  may  require.* 

(s)  If  any  such  corporation  shall  fail  to  furnish  to  the 
superintendent  of  the  banking  department  any  report  or 
settlement  required  by  this  act,  at  the  time  so  required,  it 
shall  forfeit  the  sum  of  ten  dollars  per  day  for  every  day  such 
statement  shall  be  delayed  or  withheld,  and  the  said  superin- 
tendent may  maintain  an  action  in  his  name  of  office,  to  re- 
cover such  penalty,  and  when  collected,  the  same  shall  be  paid 
into  the  treasury  of  the  State  and  be  applied  to  the  expenses 
of  the  bank  department,' 

§  32.  North  Carolina.4  (a)  It  shall  and  may  be  lawful, 
and  authority  is  hereby  given  to  any  individuals  or  persons  in 

1  §  24;  Laws  1875,  Ch.  564,  §  4.  14,  1881.     The  preamble  to  the  Act 

8  §  25;  Laws  1875,  Ch.  264,  §  5.  1869-70,  C.  129,  Battle's  Rev.,  Ch. 

3  §  26;  Laws  1875,  Ch.  264,  §  6.  12,  p.  105,  is  as  follows:  "  Whereas, 

4  Battle's  Rcvisal  of  the  Public  divers  persons,  chiefly  of  the  indus- 
Statutes  of  North  Carolina,  adopted  trial  classes,  are  desirous  of  forming 
by  the  General  Assembly  at  the  Ses-  associations  for  the  purpose  of  ac- 
sion  of  1872-3  (C.  74),  Ch.  12,  pp.  cumulating  by  small  periodical  de- 
105-107;  amended  (§  5),  Laws  1874-  posits  a  savings  fund  with  which 
5,  C.  78,  p.  71,  Feb.  11,  1875,  and  they  may  secure  a  homestead,  and 
<§  6),  Laws  1881, C.  365,  p.  604,  Mar.  for  their  mutual  benefit;  and  where- 


§  32.]  STATUTORY  PROVISIONS   OF  T1IE   STATES.  77 

any  city  or  county  in  this  State,  under  any  name  by  them  to 
be  assumed,  to  associate  for  the  purpose  of  organizing  and 
establishing  homestead  and  building  associations,  and  being 
so  associated  shall,  on  complying  with  the  provisions  of  this 
chapter,  be  a  body  politic  and  corporate,  and  as  such  shall  be 
capable  in  law  to  hold  and  dispose  of  property,  both  real  and 
personal,  may  have  and  use  a  common  seal,  may  choose  a  pre- 
siding and  other  officers,  may  enact  by-laws  for  the  regula- 
tion of  the  affairs  of  such  corporation,  and  compel  the  due 
observance  of  the  same  by  fines  and  penalties,  may  sue  and 
be  sued,  plead  and  be  impleaded,  answer  and  be  answered  in 
any  court  in  this  State,  and  do  all  acts  necessary  for  the  well- 
ordering  and  good  government  of  the  affairs  of  such  corpora- 
tion, and  shall  exercise  all  and  singular  the  powers  incident 
to  bodies  politic  or  corporate :  Provided,  however,  that  be- 
fore any  such  corporation  shall  be  entitled  to  the  privileges  of 
this  chapter,  they  shall  lodge  with  the  clerk  of  the  superior 
court  of  the  county  where  such  corporation  is  designed  to 
act,  a  copy  of  the  articles  of  association  of  such  corporation, 
signed  by  at  least  seven  members  and  certified  by  the  secretary 
thereof,  to  be  recorded  in  the  office  of  said  clerk.1 

(J)  Any  addition  or  additions  to,  alteration  or  alterations 
in,  or  amendments  of,  the  articles  of  association  of  any  such 
corporation  shall  be  signed,  certified,  and  recorded  as  is  pro- 
vided in  the  preceding  section  of  this  chapter.* 

(c)  Any  corporation  created  under  and  by  virtue  of  the 
provisions  of  this  chapter,  shall  have  power  to  declare  in  their 
articles  of  association  the  number  of  shares  of  which  the 
capital  stock  of  such  corporation  shall  consist ;  the  par  value 

as,  it  is  the  dictate  of  a  sound  policy  Vann  and  wife  v.  Fayetteville  Build- 
that  the  protection  and  encourage-  ing  and  Loan  Association,  75  N.  C. 
ment  of  the  legislature  should  be  494;  Latham  and  wife  n.  Washing- 
given  to  associations  having  in  view  ton  Building  and  Loan  Association, 
ends  and  objects  so  commendable  in  77  N.  C.  145;  Hanner  et  al.  e. 
their  character."  Decisions:  Smith  Greensboro  Building  and  Loan  As- 
and  wife  t>.  Mechanics'  Building  and  sociation,  78  N.  C.  188;  Overby  and 
Loan  Association,  73  N.  C.  372  wife  t>.  Fayetteville  Building  and 
(building  association  incorporated  Loan  Association,  81  N.  C.  56;  IIos- 
under  special  act, — usury, — in  June-  kins  v.  Mechanics'  Building  and 
tion);  Millsfl.SalisburyBuildingand  Loan  Association,  84  N.  C.  838. 
Loan  Association,  75  N.C.  292  (loans,  'Battle's  Rev.,  Ch.  12,  §  1,  p. 
—  usury,— redemption):  S.  P.  in  105.  s  §  2,  p.  106. 


78  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

of  the  same ;  to  limit  the  number  which  each  stockholder  may 
be  allowed  to  hold,  to  prescribe  the  entrance  fee  to  be  paid 
by  each  stockholder  at  the  time  of  subscribing,  to  regulate 
the  instalments  to  be  paid  on  each  share,  and  the  times  at 
which  the  same  shall  be  paid  and  payable.1 

(d)  Any  such  corporation  shall  have  power  to  issue  to 
each  member  of  such  corporation  a  certificate  of  the  shares  of 
stock  held  by  him,  and  to  enforce  the  payment  of  all  instal- 
ments and  other  dues  due  to  said  corporation  from  the  mem- 
bers or  stockholders,  by  such  fines  and  forfeitures  as  the  cor- 
poration may,  from  time  to  time  provide  in  the  by-laws  or 
articles  of  association  of  such  corporation.* 

(e)  Any  person  or  persons  applying  for  membership  or 
stock  in  any  such  corporation  after  the  end  of  a  month  from 
the  date  of  its  incorporation,  may  be  required  to  pay,  on  sub- 
scribing, such  sums  or  assessments  as  may  from  time  to  time 
be  fixed,  and  assessed  in  manner  as  may  be  provided  by  said 
corporation,  in  order  to  place  such  new  member  or  stock- 
holder on  like  footing  with  the  original  members  and  others 
holding  stock  at  the  time  of  such  application : '  Provided, 
that  any  association  that  has  been  or  may  be  organized  under 
this  chapter  shall  be  and  they  are  hereby  authorized  and  em- 
powered to  establish  one  or  more  additional  class  or  classes 
of  shares,  under  such  rules  and  regulations  and  restrictions 
for  issuing,  paying,  and  redeeming  the  same  as  to  them  shall 
appear  expedient  and  proper,  not  inconsistent  with  the  gen- 
eral provisions  of  this  chapter,  or  laws  of  North  Carolina.4 

(f)  It  shall  and  may  be  lawful  for  any  such  corporation, 
at  any  time  in  advance  of  the  time  at  which  such  corporation 
shall  cease  to  exist,  according  to  the  plan  contained  in  the 
articles  of   association   thereof,  to  advance  to  any  member 
thereof,  for  such  premium  as  may  be  agreed  upon,  the  same 
which  he  would  be  entitled  to  receive  upon  the  dissolution 
thereof,  for  any  number  of  shares  therein  held  by  him,  or  to 
purchase  from  any  member  the  share  or  shares  of  stock  held 
by  him  at  such  price  or  sum  as,  according  to  the  articles  of 
association,  such  member  may  agree  to  receive,  and,  on  pay- 
ment of  said  sum  of  money,  to  receive  from  such  member 

1  §  3,  p.  106.  »  §  4,  p.  106.  8  §  5,  p.  106. 

4  Laws  1874-5,  Ch.  78,  p.  71,  Feb.  11,  1875. 


§  33.]  STATUTORY    PUO VISIONS   OF   THE   STATES.  79 

security  as  is  hereinafter  mentioned  for  the  payment  by  such 
members  to  said  corporation  of  the  unpaid  instalments,  to  be 
paid  on  the  share  or  shares  of  stock  so  sold  or  redeemed,  to- 
gether with  interest  at  the  rate  of  eight  per  cent,  per  annum, 
on  the  sum  of  money  so  paid  or  advanced  to  such  member 
at  such  times,  and  under  and  subject  to  such  fines  and  penal- 
ties for  nonpayment  thereof,  as  may  be  prescribed  by  the* 
articles  of  association  of  such  corporation.1 

(g)  The  payment  of  the  unpaid  instalments  to  be  paid  on 
the  share  or  shares  so  purchased  or  redeemed  with  interest 
upon  the  sum  of  money  paid  therefor  as  aforesaid,  at  the 
rate  heretofore  mentioned,  and  all  fines  and  penalties  incurred 
in  respect  thereof  by  any  such  member  shall  be  secured  to 
such  corporation  by  way  of  mortgage  or  leasehold  property, 
or  by  hypothecation  of  stock  of  such  corporation  held  by  such 
member  as  may  be  provided  in  the  articles  of  association  of 
any  such  corporation :  Provided,  however,  that  in  case  of  hy- 
pothecation of  stock,  no  greater  sum  of  money  shall  at  any 
time  be  drawn  out  by  any  member  than  shall  have  already 
been  paid  in  by  him  on  all  his  shares  at  the  time  of  such  hy- 
pothecation, and  such  mortgage  or  mortgages,  and  the  mort- 
gage debt  or  debts,  intended  to  be  secured  thereby  as  afore- 
said, is  and  are  hereby  declared  exempt  from  taxation,  the 
property  so  mortgaged  as  aforesaid  to  the  corporation  being 
taxed  in  the  hands  of  the  mortgagor.2 

(h)  The  power  is  hereby  reserved  to  alter,  amend,  or  re- 
peal this  chapter  at  pleasure." 

§  33.  Ohio.4  (a)  Any  number  of  persons,  not  less  than 
five,  a  majority  of  whom  are  citizens  of  this  State,  desiring 
to  become  incorporated,  shall  subscribe  and  acknowledge,  be- 

1  Battle's  Rev.,  Ch.  12,  §  6,  p.  106;  ter,  for  provisions  applicable  to 

Laws  1881,  Ch.  365,  p.  604,  Mar.  14,  building  associations  in  common 

1881,  substituting  eight  for  six  per  with  other  corporations,  relating  to 

cent.  by-laws,  capital  stock,  officers,  clec- 

8  Battle's  Rev.,  Ch.  12,  §  7,  p.  tions,  etc.,  etc.),  Ch.  17,  £§  3833  (p. 

107.  969),  3834,  3835,  as  amended  by  Act 

8  §  8,  p.  107.  April  15,  1880  (Laws  1880,  pp.  208- 

4  Revised  Statutes  of  Ohio,  1880,  9).  3836.  Decisions:  Lucas  v.  Green- 

(vol.  i.p.  837),  Tit.ii.,  Ch.  1,  g§  3236,  ville  Building  and  Savings  Associ- 

3238,  3239,  3242,  3258  (and  see  also  ation,  22  Ohio  St.  339  (defective  ac- 

the  remaining  sections  of  said  chap-  knowledgment, — plea  of  nul  tielcor- 


80  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

fore  an  officer,  authorized  to  take  acknowledgments  of  deeds, 
articles  of  incorporation,  which  must  contain :  1.  The  name 
of  the  corporation,  which  shall  begin  with  the  word  "  The," 
and  end  with  the  word  "  Company"  (sic).  2.  The  place 
where  it  is  to  be  located,  or  where  its  principal  business  is  to 
be  transacted.  3.  The  purpose  for  which  it  is  formed.  4. 
The  amount  of  its  capital  stock,  if  it  is  to  have  capital  stock, 
and  the  number  of  shares  into  which  the  stock  is  divided.1 
The  official  character  of  the  officer  before  whom  the  acknowl- 
edgment of  articles  of  incorporation  is  made  shall  be  certi- 
fied by  the  Clerk  of  the  Court  of  Common  Pleas  of  the  county 
in  which  the  acknowledgment  is  taken,  and  the  articles  shall 
be  filed  in  the  office  of  the  Secretary  of  State,  who  shall 
record  the  same,  and  a  copy  duly  certified  by  him  shall  be 
prima-facie  evidence  of  the  existence  of  such  corporation  ; 
and  all  certificates  thereafter  filed  in  the  office  of  the  Secre- 
tary of  State  relating  to  the  corporation  shall  be  recorded.8 
Upon  such  filing  of  the  articles  of  incorporation,  the  persons 
who  subscribed  the  same,  their  associates,  successors,  and  as- 
signs, by  the  name  and  style  provided  therein,  shall  thereafter 
be  deemed  a  body  corporate,  with  succession,  and  power  to 
sue  and  be  sued,  contract  and  be  contracted  with,  acquire  and 

poration, — interest, — usury) ;  Hager-  incorporation  cured  under  Act  Mar. 

man  v.  Ohio  Building  and  Savings  10,  1859);  Risk  v.  Delphos  Building 

Association,  25  Ohio  St.  186  (plea  of  and   Savings  Association,  31    Ohio 

nultiel  corporation,— limitation  upon  St.    517   (computation   of    amount 

shares  held  by  individual  member,  due  on  mortgage, — interest  on  pre- 

— application  of  loans, — fines, — se-  miums);  Cincinnati  German  Build- 

curity, — informality  in  adoption  of  ing   Association    No.    3,    v.  Flach 

by-laws, — computing  amount  due  on  et  al.,  1  Rep.  Cine.  Super.  Ct.  468 

mortgage);  Forest  City  United  Land  (method  of  computation  of  amount 

and  Building  Association  v.  Galla-  due  on  mortgage  on  distribution); 

gheretal.,  25 Ohio  St.  208  (Acts  1867,  State  v.  Greenville  Building  Asso- 

1868,  —  depositors,  —  no      banking  ciation,  29  Ohio  St.  92  (no  power  to 

powers, — premiums   legal, — not   so  discount    paper, — fixed  premium); 

interest  on  premiums, — fines, — and  State  v.  Oberlin  Building  and  Loan 

see  preceding  case);  Licking  County  Association,  35  Ohio  St.  258  (refusal 

Savings,  Loan,  and  Building  Associ-  of  loans, — fixed  premium, — borrow- 

ation  v.  Bebout's  Administrator,  25  ing,  trafficking  in  its  own  shares, — 

Ohio  St.   252  (claim   of  heirs  and  excessive  number  of  shares  in  one 

legal  representatives);   Spinning  v.  individual, — dividends, — comprom- 

The  Home  Building  and   Savings  ising  with  members). 

Association,  26  Ohio  St.  483  (error  ]  Rev.  St.,  1880,  §  3236. 

in  acknowledgment  of  certificate  of  *  '  ""'"* 


§  33.]  STATUTORY    PROVISIONS   OF   THE   STATES.  81 

convey  at  pleasure  all  such  real  or  personal  estate  as  may  be 
necessary  and  convenient  to  carry  into  effect  the  objects  of 
the  incorporation,  to  make  and  use  a  common  seal,  the  same 
to  alter  at  pleasure,  and  to  do  all  needful  acts  to  carry  into 
effect  the  objects  for  which  it  was  created.1 

(&)  The  stockholders  .  .  .  shall  be  deemed  and  held  liable, 
in  addition  to  their  stock,  in  an  amount  equal  to  the  stock  by 
them  subscribed  or  otherwise  acquired,  to  the  creditors  of  the 
corporation,  to  secure  the  payment  of  the  debts  and  liabilities 
of  the  corporation." 

(c)  A  corporation  organized  for  the  purpose  of  raising 
money  to  be  loaned  among  its  members  and  depositors,  and 
for  use  in  buying  lots,  or  in  building  or  repairing  houses,  or 
other  purposes,3  may  levy,  assess,  and  collect  from  its  members 
such  sums  of  money,  by  rates  of  stated  dues,  fines,  interest  on 
loans  advanced,  and  premiums  bid  by  members  or  depositors- 
for  the  right  of  precedence  in  taking  loans,  as  the  corporation 
by  its  by-laws  shall  provide ;  and  it  may  acquire,  hold,  en- 
cumber, and  convey  all  such  real  estate  and  personal  property 
as  may  be  legitimately  pledged  to  it  on  such  loans,  or  may 
otherwise  be  transferred  to  it  in  the  due  course  of  its  business ; 
but  the  dues,  fines,  and  premiums  so  paid  by  its  members  or 
depositors,  although  in  addition  to  the  legal  rate  of  interest 
on  loans  taken  by  it,  shall  not  be  construed  to  make  the  loans 
so  taken  usurious  ;  and  no  person  shall  hold  more  than  twenty 
shares  in  any  such  association  in  his  own  right.4 

(d)  Such  association  may  receive  on  deposit  ail  sums  of 
money  offered  for  that  purpose  by  mechanics,  clerks,  laborers,, 
servants,  and  others,  on  such  terms,  and  at  such  rates  of  in- 
terest, not  exceeding  the  legal  rate,  as  shall  be  prescribed  by 
the  Directors,  and  loan  the  same  pursuant  to  the  preceding 
section.8 

(e)  So  much  of  the  earnings  as  may  be  necessary  shall  be 
set  apart  to  defray  the  current  expenses  of  the  association, 
and  a  portion  of  the  earnings,  to  be  determined  by  the  Board 
of  Directors,  shall  be  reserved,  annually  or  semi-annually,  for 
the  payment  of  contingent  losses,  and  the  residue  of  such 

1  §  3239.  *  §  3258.  8  i.  e.  Building  Associations. 

4  §  3833.  • §  3834. 


82  THE  LAW  OF  BUILDING  ASSOCIATIONS.          [cil.  II. 

earnings  shall  be  transferred  to  the  credit  of  all  members, 
borrowing  and  non-borrowing,  to  be  paid  ratably  to  them  at 
such  times  and  in  such  manner  as  the  association,  by  its  con- 
stitution and  by-laws,  rules  and  regulations  in  conformity 
with  this  act,  may  provide ;  and  upon  the  cancellation  of  any 
share  or  shares  that  have  been  fully  paid,  by  dues  paid  in  and 
earnings  credited,  the  association  shall  pay  such  members 
their  pro-rata  share  of  such  reserve  fund,  and  at  the  end  of 
eneh  year  shall  make  a  rebate  of  interest  on  the  amount  of 
dues  paid  on  loans  awarded.     Such  associations  shall  provide 
in  their  constitution  and  by-laws  rules  and  regulations,  for  the 
terms  of  membership ;  for  the  manner  of  subscribing  shares 
of  stock  therein ;  for  the  times  and  amounts  of  payment  (but 
the  premium  paid  in  any  one  year  shall  not  exceed  such  pro- 
portionable part  of  the  premium  bid  as  one  year  bears  to  the 
approximate  number  of  years  which  that  class  of  loans  run) ; 
for  the  withdrawal  of  non-borrowing  members ;  for  the  can- 
cellation of  the  securities  of  borrowing  members,  upon  de- 
mand being  made  by  them  or  their  legal  representatives,  which 
shall  be  upon  the  following  terms,  to  wit :  after  the  premium 
for  one  year  shall  have  been  paid,  the  borrowing  member 
shall  be  permitted  to  adjust  and  pay  off  his  loan  by  paying  to 
the  association  an  amount,  which,  added  to  the  dues  and  in- 
terest already  paid  and  earnings  credited,  that  will  aggregate 
the  sum  actually  borrowed,  with  the  legal  rate  of  interest 
thereon,  and  a  relative  proportion  of  the  premium  bid  for  the 
time  the  loan  is  retained,  as  hereinbefore  provided ;  and  shall 
be  permitted  to  reinstate  their  stock  by  paying  to  the  associa- 
tion the  amount  actually  borrowed,  with  interest  thereon, 
and  the  proportion  of  premium  as  aforesaid,  together  with  all 
dues  and  assessments  delinquent  thereon.     And  it  is  hereby 
provided  that  all  adjustments  heretofore  made  in  good  faith 
between  such  corporation  and  its  respective  members,  in  ac- 
cordance with  its  constitution  and  by-laws,  shall  be  valid  and 
binding  upon  them.     The  stock  and  shares   of  individual 
members  or  depositors  of  such  corporation  shall  be  considered 
and  held  as  credits,  and  the  said  members  and  depositors  in- 
dividually, shall  list  for  taxation  the  number  of  shares  held 
by  them,  and  the  true  value  thereof  in  money,  on  the  day 
preceding  the  second  Monday  of  April,  in  each  year,  and  the 


§34.] 


STATUTORY   PROVISIONS  OF  THE  STATES. 


83 


same  shall  be  assessed  at  such  valuation  for  taxation,  and 
taxed  as  other  property.1 

§  34.  Pennsylvania."    (a)  Building  and  loan   associations 


1  Act  April  15,  1880,  Laws  1880, 
pp.  208-9,  amending  Rev.  Stat.  § 
3835  by  substituting  the  above. 

*  Act  April  29,  1874,  P.  L.,  p.  73; 
Act  April  10,  1879,  P.  L.,  p.  16;  Act 
April  17,  1876,  P.  L.,  p.  30;  Act 
April  17,  1876,  P.  L.,  p.  41;  Act 
June  19,  1878,  P.  L.,  p.  214;  Act 
June  10,   1881,  §  1,  P.  L.,  p.  99; 
See,  also,  Act  May  11, 1874,  P.  L., 
p.  133,  validating  defective  charters. 
Tiie  Act  April  12,  1859,  P.  L.,  p. 
644,  Purd.  Dig.,  vol.  i.,  p.  183,  seems 
to  have  been  repealed  by  implica- 
tion, by  the  Act  April  29,  1874,  P. 
L.,  p.  73,  which  is  a  general  incor 
poration  act.     There  is  no  provision 
abrogating  the  Act  of  1859  in  the 
Act  of  1874,  whose  last  clause,  in- 
deed, repeals  former  laws  relating 
to  certain  corporations  expressly. 
(For  a    statement  of  the  law  ad- 
versely to  the  application  of  the 
doctrine  of  repeal  by  implication, 
see  post.,  §  35,  note  7,  Davies  & 
Co.  v.   Creighton,  33  Grattan,  696 
(cit.  Hogan  v.  Guigon,  judge,  29  Id. 
705;  Harfordfl.U.  8.,  SCranch,  109; 
Wood  v.  U.  8.,  16  Pet.  342,  363;  Mc- 
Coole  v.  Smith,  1  Black,  59,  470;  Ar- 
thur v.  Homer,  96  U.  8.  (6  Otto),  137), 
where,  in  Virginia,  a  similar  case 
was  discussed  and  a  former  statute 
maintained.)    But  in  Pennsylvania, 
the    inconsistency    held    necessary 
to  be  shown  between  two  acts,  in 
order  to  make  the  later  operate  to  re- 
peal the  former  by  implication,  has 
been  found  and  declared  in  "acts, 
which,   although  in  pan  materia, 
grant  a  right  conditioned  on  differ- 
ent things."    Gwinner  v.  The  Le- 
high  and  Delaware  Gap  R.  R.  Co., 
55  Pa.  St.  126.     And  in  Johnston's 
Estate,  9  Casey,  511,  it  was  said,  that 


"a  subsequent  statute  revising  the 
whole  subject-matter  of  a  former 
one,  and  evidently  intended  as  a 
substitute  for  it,  although  it  contains 
no  words  to  that  effect,  must,  in  the 
principles  of  law,  as  well  as  in  rea- 
son and  common  sense,  operate  to 
repeal  the  former."  (Woodward,  J., 
cit.  Bartlett  v.  King,  12  Mass.  545; 
King  v.  Cator,  2  Burr.,  2026;  King 
v.    Davis,   1    Leach's   Cases,   306). 
Upon   such   grounds  it  was    held 
that  the  Act  of  1859  repealed  all 
prior  building  association  acts   in 
Pennsylvania.    Rhoads  v.  Hoeruers- 
town  Building  Association,  82  Pa. 
St.  180.     And  all  that  is  said  there, 
seems  to  apply,  mutatis  mutandis,  to 
the  Act  of  1874,  together  with  much 
that  might  be  added,  in  ascertaining 
its  effect  upon  the  earlier  legislation. 
If,  however,  the  Act  of  1874  left 
any  thing  of  the  Act  of  1859  in  force, 
it  is  repealed  by  the  Act  of  April 
10,  1879,  P.  L.  16,  which  expressly 
repeals  all  laws  or  parts  of  laws  in- 
consistent with  its  provisions.    (In 
Cahall  v.  Citizens'  Mutual  Building 
Association,    61    Ala.    232,    citing 
Johnston's  Est.,  33  Pa.  St.  511,  and 
Wakefield  v.  Phelps,  37  N.  H.  295, 
the  relation  of  two  acts  is  adjudi- 
cated, which  bears  a  striking  resem- 
blance to  that  between  the  Acts  of 
1859  and  1874  (and  1879).     The  Rev. 
Code  of  1867.  §§  1756-1757,  which 
provided  for  a  method  of  incorpora- 
tion similar  to  that  contemplated 
in  the  Act  of  1859,  was  held  to  be 
repealed  by  the  Act  of  Nov.   18, 
1868,   p.   349,   which    prescribes  a 
method  similar  to  that  of  the  Act  of 
1874,  and  is  a  general  incorporation 
law.     Like  the  Act  of  1879,  supple- 
menting the  Act  of  1874  as  to  build- 


THE   LAW   OF  BUILDING   ASSOCIATIONS. 


[cil. 


are  created  by  letters  patent,  issuing  by  direction  of  the  Gov- 
ernor of  the  commonwealth,  upon  the  voluntary  association 


ing  associations,  the  Alabama  Act 
of  1868  contained  a  section  repeal- 
ing all  acts  and  parts  of  acts  incon- 
sistent therewith.)  By  the  Act  of 
1879  some  portions  of  the  Act  of 
1874  are  apparently  superseded. 
See  Freedley,  Gen.  Corp.  Law  of 
Pa.,  p.  66,  note  3.  These  por- 
tions are  inserted  in  the  notes. 

Decisions:  Loan  Association  n. 
Stonemetz,  25  Pa.  St.  534  (sala- 
ries,— directors);  Bechtold  v.  Brehm, 
26  Id.  269  (unincorporated  build- 
ing associations, — usury) ;  Kupfert  v. 
Guttenberg  Building  Association, 
30  Id.  465  (Acts  April  22,  1850,  May 
8,  1855, — loans, — usury);  Hughes's 
App.,  30  Id.  471  (S.  P.);  North 
America  Building  Association  v. 
Sutton,  35  Id.  463  (membership, — 
loan, — stock  payments, — transfer  of 
stock);  Philanthropic  Building  As- 
sociation v.  McKnight,  35  Id.  470 
(recovery  of  usury  paid) ;  Schober 
v.  Accommodation  Savings  Fund 
and  Loan  Association,  35  Id.  223 
(loans  to  members  not  discounts); 
Building  Association  v.  Seemiller,  3 
Phila.  115;  35  Pa.  St.  225,  note 
(S.  P.);  Larkins's  App.,  4  Phila. 
95;  38  Pa.  St.  457  (negligence,— 
stock, — estoppel)  ;  Denny  v.  West 
Philadelphia  Saving  and  Build- 
ing Association,  39  Pa.  St.  154 
(usury, — retroactive  and  expository 
statutes);  Reiser  «.  William  Tell 
Savings  Fund  Association,  39  Id. 
137  (S.  P.);  Premium  Fund  Asso- 
ciation's App.,  39  Pa.  St.  156 (S.  P.); 
Blackburne's  App.,  89  Id.  160(8.  P.); 
Houser  v.  Hermann  Building  As- 
sociation, 41  Id.  478(8.  P.);  Kelly  v. 
Perseverance  Building  Association, 
39  Id.  148  (agreement  not  to  apply 
stock) ;  McGrath  t.  Hamilton  Savings 
and  Loan  Association,  44  Id.  383 


(contribution  to  losses,  etc.);  Spring 
Garden  Association  v.  Tradesmen's 
Loan  Association,  46  Id.  493  (appli- 
cation of  stock  payments  to  loan); 
Schnepf'g  App.,  47  Id.  37  (usury  in 
mortgage  after  judgment, — terre- 
tenaut);  Philadelphia  Mercantile 
Loan  Association  v.  Moore,  47  Id. 
233  (double  hypothecation  of  stock); 
Everham  v.  Oriental  Savings  «nd 
Loan  Association,  5  Phila.  62;  47 
Pa.  St.  352  (mortgage  after  payment 
of  priucipal,  a  security  for  dues, 
etc.);  Manufacturers',  etc.,  Loan 
Co.  v.  Odd  Fellows'  Hall  Associa- 
tion, 48  Pa.  St.  446  (official  bond); 
Miller  v.  Jefferson  Building  Asso- 
ciation, 50  Id.  32  (compromise, — es- 
toppel); German  Union  Building 
and  Savings  Fund  Association  v. 
Sendmayer,  50  Id.  67  (transfer  of 
stock, — measure  of  damages  for  re- 
fusal); Kisterbock's  App.,  51  Pa. 
St.  485  (misbehaving  director  post- 
poned ou  distribution) ;  Jarrett  v. 
Cope, 68  Id.  67  (unincorporated  build- 
ing associations, — usury);  Bank  of 
Commerce's  App.,  73  Id.  59  (trans- 
fer of  stock, — evidence  of  member- 
ship); Flounders  v.  Hawley,  78  Id. 
45  (premium  upon  re-loan);  Swift  v, 
Alleghany  Loan  and  Building  As- 
sociation, 82  Id.  142  (sci.  fa.  on 
mortgage);  Rhoadsr.  Hoernerstown 
Building  Association,  82  Id.  180 
(building  association  legislation  in 
Pa., — defective  process  of  incorpo- 
ration,—  unincorporated  building 
associations);  Wolbach  v.  Lehigh 
Building  Association,  84  Id.  211 
(strangers, — married  woman  mort- 
gagee); Juniata  Building  Associ- 
ation v.  Mixell,  Id.  313  (married 
woman's  mortgage  to  secure  hus- 
band's loan);  U.  S.  Building  and 
Loan  Association  v.  Silverman, 


§  34.] 


STATUTORY   PROVISIONS  OF  THE   STATES. 


85 


of  five  or  more  persons,  under,  and  in  the  manner  provided 
for  by  the  general  incorporation  laws  of  the  State,1  for  corpo- 


35  Id.  394  (withdrawal,  —  contri- 
bution to  losses,  —  pleading,  — 
member's  right  to  sue  society); 
Becket  v.  Unioutown  Building  As- 
sociation, 88  Pa.  St.  211  (provi- 
sions of  by-laws,  etc.,  inconsistent 
with  statute, — plea  of  uul  tiel  cor- 
poration); Workingmeu's  Building 
Association  v.  Coleman,  8  W.  N. 
C.  17;  89  Pa.  St.  428  (defective  in- 
corporation cured, — plea  of  nul  tiel 
corporation);  Link  v.  Germautown 
Building  Association,  89  Pa.  St.  15 
(unincorporated  building  associa- 
tions,— terre-tenant, — usury, — stock 
payments  and  mortgage);  Peabody 
Building  and  Loan  Association  v. 
Houseman, 89  Pa.  St.  261  (solicitor,— 
agency);  Early  and  Lane's  App.,  Ib. 
411  (hypothecated  stock);  Bismark 
Building  Association  ®.  Bolster  et 
al.,  92  Pa.  St.  123  (chattel  mortgage 
not  within  meaning  of  acts  having 
exclusive  reference  to  mortgages 
upon  real  estate);  O'Rourke  v.  West 
Pa.  Loan  and  Building  Associa- 
tion, 8  W.  N.  C.  176;  93  Pa.  St. 
308  (members'  right  to  sue, — equity 
jurisdiction) ;  GermaniaBuilding  As- 
sociation v.  Neill,  93  Id.  322  (mort- 
gage, —  merger,  —  stock  hypothe- 
cation); Watkin's  v.  Workingmen's 
Building  and  Loan  Association,  38 
Leg.  Int.  333;  10  W.  N.  C.  414;  97 
Pa.  St.  514  (loans, — application  of 
stock  payment  to  mortgage  debt, — 
forfeiture, — proof  of  maturity);  Sel- 
den  v.  Reliable  Savings  and  Build- 
ing Association,  32  P.  F.  Sm.  336; 
2  W.  N.  C.  481  (loans,— premiums, 
etc.,  pleading, — agency);  Faulkner's 
App.,  11  W.  N.  C.  48  (power of  pur- 
chasing real  estate, — borrowing, — 


suit  against  building  associations  on 
bond,  ultra  vires);  Association  «. 
Steele,  Ib.  204  (mortgage  by  married 
women — estoppel  by  recitals);  Love 
v>.  Building  and  Loan  Association, 
Ib.  303  (report  of  auditors  as  to 
shares  no  ground  for  judgment  for 
want  of  affidavit  of  defence  by  with- 
drawing member  against  society); 
Bourgignon  and  Excelsior  Building 
Association  v.  Commonwealth,  10 
Id.  161  (taxation);  Economy  Build- 
ing Association  t>.  Hungerbuehler, 
9  Id.  218  (application  of  stock  pay- 
ments to  mortgage, — terre-tenant); 
Stile's  App.,  Ib.  83  (fixed  pre- 
mium illegal,  may  be  defalked); 
Orangeville  Mutual  Savings  Fund 
and  Loan  Association  ».  Young, 
Ib.  251  (borrower  must  be  in- 
jured thereby);  James  v.  National 
Building  Association,  Ib.  325  (agen- 
cy,— estoppel);  Gass  v.  Citizens' 
Building  and  Loan  Association,  Ib. 
326  (agency, — proof);  Kingsessing 
Building  Association  v.  Roan,  Ib.  15 
(married  woman's  mortgage, — dis- 
ability cannot  be  set  up  after  death) ; 
Newlin  v.  The  Milton  Building  and 
Loan  Association  No.  2,  Ib.  220  (ac- 
knowledgment of  withdrawal  no- 
tice,— affidavit  of  defence) ;  Est.  Na- 
tional Savings,  Loan  and  Building 
Association,  Ib.  79  (equity  jurisdic- 
tion to  wind  up  building  associ- 
ations,— assignment  for  benefit  of 
creditors);  Powell  v.  Abbott,  Ib.  23, 
(unincorporated  building  associ- 
ations, —  by-  laws,  —  constitution); 
Building  Association  v.  Rice  and 
wife,  8  Id.  12  (married  woman's 
mortgage);  Building  Association  «. 
Britten,  7  Id.  330  (withdrawals); 


1  Act  April  29,  1874,  P.  L.,  p.  73.     See  also  provisions  of  Act  April  17, 
1876,  P.  L.,  p.  80.  supplementary  to  foregoing  act. 


THE  LAW  OF  BUILDIHO  ASSOCIATIONS.         [CH.  II. 


rations  of  the  second  class,  of  which  building  and  loan  associ- 
ations are  the  fifteenth  head.' 

Rodgers  t>.  8.  W.  Mutual  Savings     building  association  not  affected  by 


Fund  and  Building  Association,  7 
Id.  95 (by -laws, — withdrawal);  Witt- 
man  v.  Building  Association,  Ib.  80 
(suit  by  withdrawing  member, — alle- 
gation of  losses);  Association  v. 
Gibson,  6  Id.  502  (agency  of  secre- 
tary and  treasurer);  Kreamer  «. 
Springfield  Building  Association, 
Ib.  267  (application  of  stock  pay- 
ments to  debt, — terre- tenant) ;  Pfaft 
«.  Building  Association,  Ib.  349  (pre- 
mature winding  up, — injunction); 
Weiss's  App.,  5  Id.  423  (assignee 
of  hypothecated  stock);  German 
Fair  Hill  Building  Association  V. 
Metzger,  3  Id.  204  (interest  pending 
a  suit  on  mortgage);  Gormerly  t>. 
The  Port  Richmond  Building  and 
Loan  Association  et  al.,  Ib.  11  (disso- 
lution in  equity  not  decreed  where 
there  is  a  remedy  at  law);  Building 
Association®.  George,  Ib.  239 (fines); 
Building  Association  v.  Schuller, 
Ib.  431  (fines);  Association  v.  Neu- 
rath,  2  Id.  95  (interest  on  premium); 
Delaware  Building  Association  v. 
Keller,  2  Id.  29  (premium);  Build- 
ng  Association  v.  Benson  &  Allen, 
Ib.  541  (surety  on  bond  when  mort- 
gage merged);  Britton  v.  American 
Building  and  Loan  Association,  12 
Phila.  430;  35  Leg.  Int.  474  (no 
judgment  against  society  for  value 
of  shares  until  after  final  meeting  to 
make  division);  Hansbury  v.  Pfeif- 
fer,  12  Phila.  250;  35  Leg.  Int.  395 
(unincorporated  building  associ- 
ation ;  see  Link  v.  Building  Associ- 
ation, 89  Pa.  St.  15);  Sherman  Build- 
ing Association  v.  Rock,  9  Phila. 
75  (return  of  one-eighth  premium 
for  every  whole  year  unexpired); 
Kisterbock  v.  Premium  Building  As- 
sociation, 7  Id.  185  (mortgage  of 


its  dissolution  when  land  in  hands 
of  trustee) ;  Building  Association  v. 
Eshelbach,  7  Phila.  189  (stock  pay- 
ments,— mortgage);  Association  t>. 
Wall,  Ib.  240  (burden  of  proof  of 
payment);  Building  Association  t>. 
Ellsler,  6  Id.  6  (usury,— recovery); 
Maule  v.  Building  Association,  5  Id. 
421  (limitation  of  time  to  recover 
usurious  interest) ;  Leff man  v.  Flan- 
igan,  Ib.  155,  419  (suit  against  direc- 
tors); Manuf.,  etc.,  L.  Co.  v.  Cono- 
ver.Ib.18  (discounting, — ultra  vires, 
— plea  of  nultiel  corporation);  Skin- 
ner's Est.,  4  Id.  189  (usury);  Fisher 
0.  Kahlnan,  3  Id.  213  (usury,— 
recovery, — terre  -  tenant);  Marble 
Building  Association  v.  Hocker,  Ib. 
494  (Act  1859  no  retroactive  effect); 
Building  Association  v.  Reid,  Ib. 
345  (loans, — stock  payments) ;  Build- 
ing Association  v.  O'Connor,  Ib. 
453  (usury  in  mortgage  may  bo,  set 
up  before  auditor  by  judgment 
creditors);  Building  Association  v. 
Timmins,  Ib.  209  (usury);  Kelly  v. 
Accommodation  Saving  Fund  and 
Loan  Association,  2  Id.  237  (mar- 
shalling of  assets);  Sunbury,  etc., 
Association  t>.  Martin,  1  Luz.  Leg. 
Reg.  147  (loans);  West  Harrisburg 
Loan  and  Building  Association  v. 
Morganthal,  2  Pears.  343  (defect  in 
recording  charter  cannot  be  raised 
collaterally,  —  pleading) ;  Miller's 
Est.,  Ib.  248 (charter, — real  estate, — 
plea  of  nul  tiel  corporation);  Brandt 
v.  Greul,  4  Leg.  Gaz.  388;  1  Luz. 
L.  R.  737  (computation  of  period  of 
grace  on  arrears) ;  Kehler  v.  Miller, 
4  Leg.  Gaz.  126;  1  Leg.  Chr.  35 
(premium,  —  fines,  —  waiver  of  ex- 
emption); Snider'sEst.,34  Leg.  Int. 
49  (discharge  of  mortgage  by  judi. 


1  See  above  acts. 


§34.] 


STATUTORY   PROVISIONS  OF  THE  STATES. 


(b)  Notice  of  the  intention  to  apply  for  any  such  charter 
shall  be  inserted  in  two  newspapers  of  general  circulation, 
printed  in  the  proper  county,  for  three  weeks,  setting  forth 
briefly  the   character  and   object  of   the  corporation    to  be 
formed,  and  the  intention  to  make  application  therefor.1 

(c)  The  charter  of  intended  building  and  loan  associations- 
must  be  subscribed  by  five  or  more  persons,  three  of  whom 
at  least  must  be  citizens  of  this  commonwealth,  and  shall  set 
forth :  1.  The  name  of  the  corporation.     2.  The  purpose  for 
which  it  is  formed.     3.  The  place  or  places  where  its  busi- 
ness is  to  be  transacted.    4.  The  term  for  which  it  is  to  exist. 
5.  The  names  and  residences  of  the  subscribers,  and  the  num- 
ber of  shares  subscribed  by  each.     6.  The  number  of  its  di- 
rectors, and  the  names  and  residences  of  those  who  are  chosen 
directors  for  the  first  year.     7.  The  amount  of  its  capital 
stock,  and  the  number  and  par  value  of  shares  into  which  it 
is  divided.2     8.  Whether  the  premium  or  bonus  bid  for  the 
prior  right  to  a  loan  shall  be  deducted  therefrom  in  advance, 


cial  sale,  what  due)  ;  Association  v, 
Hubley,  Ib.  6  (withdrawal, — invest- 
ment of  all  funds  improper);  Spring- 
ville  Building  Association  v.  Raber, 
33  Id.  329;  24  Pittsb.  L.  J.  23  (ap- 
plication of  stock  payments  to 
debt, — sheriff 's  vendee) ;  Chambers- 
burg  Woollen  Co.  v.  Chambersburg 
Manufacturing  and  Building  As- 
sociation, 31  Leg.  Int.  357  (in- 
solvency); Conrow  v.  Tradesmen's 
Savings  Fund  and  Loan  Associa- 
tion, 21  Leg.  Int.  109  (loan);  Eyre 
v.  Building  Association,  17  Id.  148 
(compromise,  — estoppel);  Associa- 
tion v.  Dobbins,  15  Id.  45  (loan); 
Columbia  Building  Association  ». 
Howe,  Ib.  45  (loan);  Saving  Fund  v. 
Murray,  14  Id.  133 (usury);  Associa- 
tion v.  Kribs,  7  Leg.  and  Ins.  Rep.  21 
(association  may  sue  member  for 
dues);  Marietta  Building  Associa- 
tion v.  Hanlen,  10  Lane.  Bar  47 
(fines, — computation  of  amount  due 
on  mortgage);  Ashland  Banking  Co. 
v.  Centralia  Mutual  Savings  Fund 


Association,  9  Luz.  Leg.  Reg.  41 
(order  drawn  by  president  on  traas- 
urer  is  not  a  negotiable  security, — 
powers  of  building  associations); 
White  Haven  Loan  and  Building 
Association  v.  Kelly  et  al.,  Ib.  9 
(agreement  of  stockholders  to  dis- 
band is  valid, — plea  of  mil  tiel  cor- 
poration); Relief  Savings  Fund  As- 
sociation v.  Longshore  et  al.,  8  Id. 
199  (premium, — application  of  loan, 
— surety) ;  National  Building  Asso- 
ciation v.  Hottenstein,  10  Pittsb. 
Leg.  Jour.,  N.  S.  225  (serial  build- 
ing associations, — burden  of  proof 
of  loss);  Knoblauch  v.  Robert  Blum 
Building  and  Loan  Association,  No. 
2,  8  Id.  39;  Paffert  v.  Same,  II).  40 
(proportionate  loss  retained  from 
withdrawing  stockholders  before  it 
occurs,  if  certain  to  occur).  Tan- 
ner's App. ,  11  Pittsb.  Leg.  Jour.  301 
(married  woman). 

'Acts  April    29,   1874,   §  3,   p. 
75 


€8  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  II. 

or  paid  in  periodical  instalments,  or  whether  interest  in  ad- 
vance shall  be  deducted  from  the  loan  in  lieu  of  premium  or 
bonus.1  This  certificate  shall  l>e  acknowledged  by  at  least 
three  of  the  subscribers  thereto,  before  the  Recorder  of  Deeds 
of  the  county  in  which  the  chief  operations  are  to  be  carried 
on,  or  in  which  the  principal  office  is  situated,  and  they  shall 
also  make  and  subscribe  an  oath  or  affirmation  before  him,  to 
be  endorsed  on  the  said  certificate,  that  the  statements  con- 
tained therein  are  true.  The  said  certificate,  accompanied 
with  proof  of  publication  of  notice,  as  hereinbefore  provided, 
.shall  then  be  produced  to  the  Governor  of  this  common- 
wealth, who  shall  examine  the  same,  and  if  he  find  it  to  be 
in  proper  form,  and  within  the  purposes  named  in  the  second 
class,  ....  he  shall  approve  thereof,  and  endorse  his  ap- 
proval thereon,  and  direct  letters  patent  to  issue  in  the 
usual  form,  incorporating  the  subscribers,  and  their  fcttCH 
ciates  and  successors,  into  a  body  politic  and  corporate,  in 
deed  and  in  law,  by  the  name  chosen,  and  the  said  certifi- 
cate shall  be  recorded  in  the  office  of  the  secretary  of  the 
commonwealth  in  a  book  to  be  by  him  kept  for  that  pur- 
pose, and  he  shall  forthwith  furnish  to  the  Auditor-General 
an  abstract  therefrom,  showing  the  name,  location,  amount  of 
capital  stock,  and  name  and  address  of  the  treasurer  of  such 
corporation.  The  said  original  certificate,  with  all  of  its  en- 
dorsements, shall  then  be  recorded  in  the  office  for  the  re- 
cording of  deeds,  in  and  for  the  county  where  the  chief  op- 
erations are  to  be  carried  on,  and  from  thenceforth  the  sub- 
scribers thereto,  and  their  associates  and  successors,  shall  l>e  a 
corporation,  for  the  purposes  and  upon  the  terms  named  in 
the  said  charter.  Certified  copies  of  both  the  records  thereof, 
and  of  the  charters  of  the  corporations  named  in  the  first  class 
specified  in  the  foregoing  section,  shall  be  competent  evi- 
dence for  all  purposes  in  the  courts  of  this  commonwealth. 
The  Secretary  of  the  commonwealth  shall  charge  and  receive 
a  fee  of  five  dollars  upon  every  paper  relating  to  a  corpora- 
tion filed  or  recorded  in  his  office." 

(d)  Building  and  loan  associations  incorporated  under  the 
provisions  of  this  act,  shall  have  the  powers,  and  from  the 

1  Act  April  10,  1879,  §  1;  P.  L.,  p.  16. 
8  Act  April  29,  1874,  §  3,  p.  76. 


$  34.]  STATUTORY    PROVISIONS  OF  THE   STATES.  89 

date  of  the  letters  patent  creating  the  same,  when  not  other- 
wise provided  in  this  act,  be  governed,  managed,  and  con- 
trolled as  follows :  They  shall  have  the  power  and  franchise 
of  loaning  or  advancing  to  the  stockholders  thereof  the 
moneys  accumulated  from  time  to  time,  and  the  power  and 
right  to  secure  the  repayment  of  such  moneys,  and  the  per- 
formance of  the  other  conditions  upon  which  the  loans  are  to 
be  made,  by  bond  and  mortgage,  or  other  security,  as  well  as 
the  power  and  right  to  purchase  or  erect  houses,  and  to  sell, 
convey,  lease,  or  mortgage  the  same  at  pleasure,  to  their  stock- 
holders or  others,  for  the  benefit  of  their  stockholders  in  such 
manner,  also,  that  the  premiums  taken  by  the  said  associa- 
tions for  the  preference  or  priority  of  such  loans  shall  not  be 
deemed  usurious,  and  so,  also,  that  in  case  of  nonpayment  of 
instalments,  premiums,  or  interest  by  borrowing  stockholders 
for  six  months,  payment  of  principal,  premiums,  and  interest, 
without  deducting  the  premium  paid,  or  interest  thereon,  may 
be  enforced  by  proceeding  on  their  securities  according  to 
law.1  And  it  shall  be  lawful  for  any  mutual  savings  fund, 
or  building  and  loan  association,  now  incorporated,  or  here- 
after to  be  incorporated,  in  addition  to  dues  and  interest,  to 
charge  and  receive  the  premium  or  bonus  bid  by  a  stock- 
holder for  preference  or  priority  of  right  to  a  loan  in  period- 
ical instalments ;  and  such  premium  or  bonus  so  paid  in  in- 
stalments shall  not  be  deemed  usurious,  but  shall  be  taken  to 
be  a  payment,  as  it  falls  due,  in  contradistinction  to  a  premium 
charged  and  paid  in  advance;  and  in  so  far  as  said  premium 
or  bonus  so  charged  and  paid,  in  addition  to  dues  and  inter- 
est, shall  be  in  excess  of  two  dollars  for  each  periodical  pay- 
ment, the  same  shall  be  lawful,  any  law,  usage  or  custom  to 
the  contrary  notwithstanding.  It  shall  also  be  lawful  for  any 
mutual  savings  fund  or  building  and  loan  association  to 
charge  and  deduct  interest  in  advance,  in  lieu  of  premiums, 
for  preference  or  priority  of  right  to  a  loan :  Provided, 
that  the  certificate  of  incorporation  of  each  association  here- 
after to  be  incorporated,  and  the  certificate  provided  in  sec- 
tion nine  of  this  act  for  those  heretofore  incorporated,  shall 
set  forth  whether  the  premium  or  bonus  bid  for  the  prior 
right  to  a  loan  shall  be  deducted  therefrom  in  advance,  or 
»  Act  April  29,  1874,  §  87,  Cl.  1.  p.  96. 


90  THE  LAW  OF  BUILDING  ASSOCIATIONS.         [CH.  II. 

paid  in  periodical  instalments,  or  whether  interest  in  advance 
shall  be  deducted  from  the  loan  in  lieu  of  premium  or  bonus.1 

(e)  The  capital  stock  of  any  corporation  created  for  such 
purposes  by  virtue  of  this  act,  shall  at  no  time  consist  in  the 
aggregate  of  more  than  one  million  dollars,  to  be  divided  into 
shares  of  such  denomination,  not  exceeding  five  hundred  dol- 
lars each,  and  in  such  number  as  the  corporators  may,  in  the  ap- 
plication for  their  charter,  specify  :  Provided,  that  the  capi- 
tal stock  may  be  issued  in  series,  but  no  such  series  shall  at 
any  issue  exceed  in  the  aggregate  five  hundred  thousand  dol- 
lars, the  instalments  on  which  stock  are  to  be  paid  at  such 
time  and  place  as  the  by-laws  shall  appoint ;  no  periodical 
payment  of  such  instalments  to  be  made  exceeding  two  dol- 
lars on  each  share,  and  said  stock  may  be  paid  off  and  retired 
as  the  by-laws  shall  direct ;  every  share  of  stock  shall  be  sub- 
ject to  a  lien  for  the  payment  of  unpaid  instalments  and  other 
charges  incurred  thereon,  under  the  provisions  of  the  charter 
and  by-laws,  and  the  by-laws  may  prescribe  the  form  and 
manner  of  enforcing  such  lien  ;  new  shares  of  stock  may  be 
issued  in  lieu  of  the  shares  withdrawn  or  forfeited ;  the  stock 
may  be  issued  in  one  or  in  successive  series,  in  such  amount 
as  the  Board  of  Directors  or  the  stockholders  may  determine.* 

(f)  Stockholders  withdrawing  voluntarily  shall  receive 

1  Act  April  10,  1879,  §  1,  p.  16.  the  treasury  of  the  corporation  be 
*  Act  April  29,  1874,  §  37,  Cl.  2,  applicable  to  the  demands  of  with- 
p.  97;  the  balance  of  this  clause  drawing  stockholders  without  the 
supplied  by  g§  2  and  3.  Act  April  10,  consent  of  the  boayd  of  directors, 
1879,  post,  (f)  and  (g)  (see  Freedley,  and  that  no  stockholder  shall  be  en- 
Corporation  Law  of  Pa.,  p.  68),  titled  to  withdraw  whose  stock  is 
isasfollows:  "  And  any  stockholder  held  in  pledge  for  security;  upon 
wishing  to  withdraw  from  the  said  the  death  of  a  stockholder,  his  or 
corporation,  shall  have  power  to  do  her  legal  representative  shall  be  en- 
BO  by  giving  thirty  days'  notice  of  titled  to  receive  the  full  amount 
his  or  her  intention  to  withdraw,  paid  in  by  him  or  her,  and  legal  in- 
when  he  or  she  shall  be  entitled  to  terest  thereon,  first  deducting  all 
receive  the  amount  paid  in  by  him  or  charges  that  may  be  due  on  the 
her,  less  all  fines  and  other  charges;  stock;  no  fines  shall  be  charged  to 
but  after  the  expiration  of  one  year  a  deceased  member's  account  from 
from  the  issuing  of  the  series,  such  and  after  his  or  her  decease  unless 
stockholder  shall  be  entitled,  in  ad-  the  legal  representatives  of  such  de- 
dition  thereto,  to  legal  interest  there-  cedent  assume  the  future  payments 
on:  Provided,  that  at  no  time  shall  on  the  stock." 
more  than  one  half  of  the  funds  in 


§  34.]  STATUTORY   PROVISIONS  OF  THE   STATES.  91 

such  proportion  of  the  profits  of  the  association,  or  such  rate 
of  interest,  as  may  be  prescribed  by  the  by-laws,  any  law  or 
usage  to  the  contrary  notwithstanding  ;  but  payment  of  the 
value  of  stock  so  withdrawn,  shall  only  be  due  when  the 
funds  now  by  law  applicable  to  the  demand  of  withdrawing 
stockholders  are  sufficient  to  meet  and  liquidate  the  same, 
and  then  only  in  the  order  of  the  respective  times  of  presen- 
tation of  the  notices  of  such  withdrawals,  which  must  have 
been  presented  in  writing  at  a  previous  stated  meeting,  and 
have  been  then  and  there  endorsed  as  to  times  of  presentation 
by  the  officer  designated  by  the  by-laws  of  the  association.1 

(g)  The  by-laws  may  provide  for  the  involuntary  with- 
drawal and  cancellation  at  or  before  maturity  of  shares  of 
stock  not  borrowed  on  :  Provided,  that  such  withdrawal  and 
cancellation  shall  be  pro  rata  among  the  shares  of  the  same 
series  of  stock :  And  provided  further,  that  not  less  than 
legal  interest  shall  be  credited  and  allowed  to  each  share  so 
withdrawn  and  cancelled.8 

(A)  The  number,  titles,  functions  and  compensation  of  the 
officers  of  any  such  corporation,  their  terms  of  office,  the 
times  of  their  elections,  as  well  as  the  qualifications  of  elec- 
tors, and  the  ratio  and  manner  of  voting,  and  the  periodical 
meetings  of  the  said  corporation  shall  be  determined  by  the 
by-laws  when  not  provided  by  this  act.3 

(i)  The  said  officers  shall  hold  stated  meetings,  at  which 
the  money  in  the  treasury,  if  over  the  amount  fixed  by  char- 
ter as  the  full  value  of  a  share,  shall  "be  offered  for  loan  in 
open  meeting,  and  the  stockholder  who  shall  bid  the  highest 
premium  for  the  preference  or  priority  of  loan,  shall  be  en- 
titled to  receive  a  loan  of  not  more  than  the  amount  fixed  by 
charter  as  the  full  value  of  a  share  for  each  share  of  stock 
held  by  such  stockholder :  Provided,  that  a  stockholder  may 
borrow  such  fractional  part  of  the  amount  fixed  by  charter  as 
the  full  value  of  a  share,  as  the  by-laws  may  provide  ;  good 
and  ample  security,  as  prescribed  by  the  by-laws  of  the  cor- 
poration, shall  be  given  by  the  borjrower  to  secure  the  repay- 
ment of  the  loan ;  in  case  the  borrower  shall  neglect  to  offer 
security,  or  shall  offer  security  that  is  not  approved  by  the 

1  Aft  April  10,  1879.  §  2.  p.  16.  8  Act  April  29,  1874,  §  37,  Cl.  3, 

-   Vft  April  10.  1879,  §  3,  p.  17.         p.  97. 


92  THE  LAW  OP   BUILDING   ASSOCIATIONS.         [CH.  11. 

Board  of  Directors,  by  such  time  as  the  by-laws  may  prescribe, 
lie  or  she  shall  be  charged  with  legal  interest,  together  with  any 
expenses  incurred,  and  the  loss  in  premium,  if  any,  on  a  re-sale, 
and  the  money  may  be  re-sold  at  the  next  stated  meeting.1 

(J)  A  borrower  may  repay  a  loan  at  any  time,  and  in  case 
of  the  repayment  thereof  before  the  maturity  of  the  shares 
pledged  for  said  loan,  there  shall  be  refunded  to  such  bor- 
rower, (if  the  premiums,  bonus,  or  interest  shall  have  been 
deducted  in  advance,)  such  proportion  of  the  premiums,  bonus, 
or  advance  interest  bid,  as  the  by-laws  may  determine  :  Pro- 
vided, that  in  no  case  shall  the  association  retain  more  than 
one  one-hundredth  of  said  premiums  or  bonus  for  each  calen- 
dar month  that  has  expired  since  the  date  of  the  meeting 
upon  which  the  loan  was  made,  or  if  interest  in  advance,  it 
shall  retain  only  the  interest  due  on  the  loan  up  to  the  time 
of  settlement :  A.nd  furtJier  provided^  that  such  borrower 
shall  receive  the  withdrawing  value  of  the  shares  pledged  for 
said  loan,  and  the  shares  shall  revert  back  to  the  association.3 

(fc)  In  case  of  nonpayment  of  instalments  of  stock,  premi- 
ums, dues  or  interest,  by  borrowing  stockholders,  for  the 
space  of  six  months,  payment  of  the  same,  together  with  the 
full  principal  of  the  loan,  may  be  enforced  by  proceeding  on 
their  securities  according  to  law ;  and  the  moneys  so  recov- 
ered shall  be  paid  into  the  treasury  of  the  association  for  such 
uses  (loans  or  otherwise)  as  may  be  deemed  proper  by  the 
association;  and  if  the  said  moneys  so  recovered,  together 
with  the  withdrawal  value  of  the  shares  of  such  defaulting 

1  Act  April  29,  1874,  §  37,  Cl.  4,  (§  37,  01.  5,  p.  98)  is  as  follows:  "A 
p.  97.  The  balance  of  this  clause,  borrower  may  repay  a  loan  at  any 
supplied  by  §  5,  Act  April  10,  1879,  time,  and  in  case  of  the  repayment 
post,  (k)  (see  Freedley,  Corp.  L.  of  thereof,  before  the  expiration  of  the 
Pa.,  p.  70),  is  as  follows:  "In  case  eighth  year,  after  the  organization 
of  nonpayment  of  instalments  or  of  the  corporation,  there  shall  be  re- 
interest  by  borrowing  stockholders,  funded  to  such  borrower  one  eighth 
for  the  space  of  six  months,  pay-  of  the  premium  paid  for  every  year 
ment  of  principal  and  interest,  with-  of  the  said  eight  years  then  unex- 
out  deducting  the  premium  paid  or  pired:  Provided,  When  the  stock  is 
interest  thereon,  may  be  enforced  issued  in  separate  series  the  time 
by  proceeding  on  their  securities  ac-  shall  lie  computed  from  the  date  of 
cording  to  law."  the  issuing  the  scries  of  stock  on 

9  Act  April  10,  1879,  §  4,  p.  17.  which  the  loan  was  made." 
The  provision  of  the  Act  of  1874 


§34.]  STATUTORY   PROVISIONS  OF  THE   STATES.  93 

borrower,  shall  exceed  the  amount  it  would  have  required, 
according  to  the  preceding  section,  to  have  voluntarily  repaid 
the  loan,  together  with  all  the  expenses  incurred  by  the  asso- 
ciation, such  excess  shall  be  repaid  to  such  defaulting  borrower.1 

(1)  No  premiums,  fines,  or  interest  on  such  premiums,  that 
may  accrue  to  the  said  corporation,  according  to  the  provisions 
of  this  act,  shall  be  deemed  usurious,  and  the  same  may  be 
collected  as  debts  of  like  amount  are  now  collected  by  law  in 
this  commonwealth.2  But  fines  or  penalties  for  the  nonpay- 
ment of  instalments  of  dues,  interest  and  bonus,  or  premiums, 
shall  not  exceed  two  per  cent,  per  month  on  all  arrearages.3 

(ra)  It  shall  be  lawful  for  any  married  woman  of  full  age 
to  hold  stock  in  any  of  said  saving  funds,  building,  or  loan 
associations ;  and  as  such  stockholder,  she  shall  have  the  rights 
and  privileges  of  other  members,  including  the  right  to  bor- 
row money  from  said  associations  and  bid  premiums  therefor, 
and  shall  also  have  the  right  and  power  to  secure  such  loan 
by  transferring  her  said  stock  or  other  securities  to  said  asso- 
ciation from  which  the  same  was  borrowed,  or  by  executing 
bond  and  mortgage  upon  her  separate  real  estate  to  secure 
said  loan :  Provided,  however,  that  the  husband  of  such  mar- 
ried woman  join  in  the  execution  of  such  bond  and  mortgage ; 
and  such  married  woman  shall  also  have  the  right  to  sell,  as- 
sign, and  transfer  her  said  stock,  or  withdraw  the  same,  without 
joining  the  husband  in  such  transfer  or  withdrawal ;  and  it 
shall  be  lawful  for  any  such  savings  fund,  building,  or  loan 
association  to  collect  such  loan  made  to  such  married  woman, 
including  the  does,  interest,  premium,  and  fines,  as  loans 
made  by  such  associations  to  other  members  are  now  by  law 
collected,  and  such  stock,  or  interest  in  such  stock,  shall  not  be 
liable  for  the  debts  of  any  husband  of  such  married  woman.4 

(n)  No  corporation  or  association  created  under  this  act 
shall  cease  or  expire  from  neglect  on  the  part  of  the  corpo- 
rators to  elect  officers  at  the  time  mentioned  in  their  charter 
or  by-laws,  and  all  officers  elected  by  such  corporation  shall 
hold  their  offices  until  their  successors  are  duly  elected.* 

1  Act  April  10,  1879,  §  5,  p.  17.  *  Act  April  10,  1879,   §  7,  p.  17- 

8  Act  April  29,  1874,  §  37,  Cl.  6,  18. 

p.  98.  »  Act  April  29,  1874,  §  87,  Cl.  7, 

3  Act  April  10.  1879.  §  6,  p.  17.  p.  98. 


THE   LAW   OP   BUILDING   ASSOCIATIONS.         [CH.  II. 

(0)  Any  loan  or  building  association  incorporated  by  or 
this  act,  is  hereby  authorized  and  empowered  to  pur- 
chase at  any  sheriffs  or  other  judicial  sale,  or  at  any  other 
sale,  public  or  private,  any  real  estate,  upon  which  such  asso- 
ciation may  have  or  hold  any  mortgage,  judgment,  lien,  or 
other  encumbrance,  or  ground  rent,  or  in  which  said  associa- 
tion may  have  an  interest,  and  the  real  estate  so  purchased,  or 
any  other  that  such  association  may  hold  or  be  entitled  to  at 
the  passage  of  this  act,  to  sell,  convey,  lease,  or  mortgage  at 
pleasure,  to  any  person  or  persons  whatsoever ;  and  all  sales 
of  real  estate  heretofore  made  by  such  associations  to  any 
person  or  persons  not  members  of  the  associations  so  selling, 
are  hereby  confirmed  and  made  valid.1  All  such  corporations 
shall  have  full  power  to  purchase  lands,  and  to  sell  and  convey 
the  same,  or  any  part  thereof,  to  their  stockholders  or  others 
in  fee  simple,  with  or  without  the  reservation  of  ground 
rents,  but  the  quantity  of  land  purchased  by  any  one  of  said 
associations  hereafter  incorporated,  shall  not,  in  the  whole,  ex- 
ceed fifty  acres,  and  in  all  cases  the  lands  shall  be  disposed  of 
within  ten  years  from  the  date  of  the  incorporation  of  such 
associations  respectively."  All  land  and  building  associations 
are  hereby  authorized  to  make  sale  of  and  assign  or  extin- 
guish to  any  person  or  persons  the  ground  rents  created  as 
aforesaid." 

(p)  All  purchases  of  lands  heretofore  made  by  building 
and  loan  associations,  incorporated  by  virtue  of  any  law  of 
this  commonwealth,  and  also  all  sales  of  the  same  made  by 
them  to  their  stockholders  or  others,  are  hereby  confirmed, 
and  the  titles  of  said  associations  and  their  vendees  are  hereby 
declared  good  and  valid,  to  all  intents  and  purposes ;  and  the 
said  associations,  their  successors  or  assigns,  may  sell,  convey 
or  lease,  at  pleasure,  at  any  time  within  five  years  from  the 
passage  of  this  act,  the  undisposed-of  portions  of  the  real 
estate  so  heretofore  purchased.4 

(3)  All  deeds  of  conveyance  of  lands  situate  within  this 
commonwealth  made  by  any  savings  fund,  building,  or  loan 

1  Act  April  29,  1874,  §  37,  Cl.  8,  8  Act  April  29,  1874,  §  37,  Cl.  10, 
p.  98.  p.  99. 

1  Act  April  29,  1874,  §  37,  Cl.  9,  4  Act  June  19,  1878;  P.  L.,  p. 
p.  98-99.  214. 


§35.]  STATUTORY   PROVISIONS   OF  THE  STATES.  95 

association  after  the  term  for  which  it  was  incorporated  shall 
have  expired,  shall  be  as  good  and  effectual,  and  have  the  same 
force  and  effect  for  passing  title  to  the  lands  so  conveyed  as 
though  executed  during  the  period  of  its  chartered  existence.1 

(/')  The  bonus  or  tax  due  the  commonwealth  upon  the 
capital  stock  of  corporations,  as  provided  for  by  Act  first  of 
May,  1868,  or  by  any  other  act,  shall  not  apply  to  or  be  due 
from  mutual  savings  fund,  or  building  and  loan  associations ; 
nor  shall  the  registry  for  corporations,  prescribed  by  the  first 
section  of  the  Act  of  first  of  May,  1868,  the  first  section  of 
the  Act  of  twenty -fourth  of  April,  1874,  and  the  twenty-sixth 
section  of  the  Act  of  twenty-ninth  of  April,  1874,  apply  to  or 
be  required  of  mutual  savings  fund,  or  building  and  loan 
associations.2 

(s)  The  General  Revenue  Act  of  June  7,  1879,'  does  not 
apply  to  building  and  loan  associations : 4  Provided,  however, 
that  moneys  loaned  by  building  and  loan  associations  shall  be 
subject  to  tax,  the  same  as  money  loaned  by  individuals.6 

(t)  Mutual  savings  fund,  or  building  and  loan  associations, 
heretofore  incorporated  under  the  provisions  of  any  law,  shall 
be  entitled  to  all  the  privileges,  immunities,  franchises  and 
powers  conferred  by  this  act,  upon  filing  with  the  secretary 
of  the  commonwealth  a  certificate  of  their  acceptance  of  the 
same  in  writing,  under  the  duly  authenticated  seal  of  said 
association,  which  certificate  shall  also  prescribe  their  mode  or 
plan  of  charging  premiums,  bonus,  or  advance  interest,  as  set 
forth  in  the  first  section  of  this  act ;  and  upon  such  accep- 
tance and  approval  thereof  by  the  Governor,  he  shall  issue 
letters  patent  to  said  corporation  reciting  the  same.8 

§  35.  Virginia.7    (a)  Any  number    of  persons  not    less 

1  Act  April  17, 1876;  P.  L.,  p.  41.  696,  that  this  act  was  not  repealed 

4  Act  April  10,  1879;  §  8,  p.  18.  by  any  of  the  subsequent  statutes, 

8  P.  L.,  p.  112.  and  that  a  building  association  or- 

4  Act  June  10,   1881,  §  1;  P.  L.,  ganized  under  it,  on  Sept.  2,  1S72, 

p.  99.  was  a  legally  organized    corpora- 

6  Ib.  tion.      The  acts  referred   to  were 

«  Act  April  10,  1879,  §  9,  p.  18.  Acts  1853-4,  C.  46;  1855-6,  C.  36; 

1   Virginia  Acts    of     Assembly,  1857-8,  C.70;  1866-7.  C.129;  1870-1, 

1852,  C.  101,  pp.  81-83,  Act  May  C.   277.     It  is  there  said  that  the 

29, 1852.    It  was  decided,  in  Davies  repeal  of  a  statute  by  implication  is 

&  Co.   v.   Creighton,   83  Gr.ittan,  not  favored  by  the  courts  (cit.  Ho- 


96 


THE   LAW   OF  BUILDING   ASSOCIATIONS. 


[cil. 


than  nine,  may  associate  and  become,  in  the  manner  herein- 
after prescribed,  un  incorporated  company,  for  the  purpose  of 
accumulating  a  fund,  to  enable  its  respective  members  to  pnr- 
chase  houses  and  lots,  erect  buildings,  improve  lands,  and  to 
remove  encumbrances  from  real  estate,  and  for  the  further 
purpose  of  distributing,  among  the  members,  who  do  not  re- 
gan  v.  Guigon,  judge,  29 Gratt.  705);  by  a  body  politic  or  corporate,  ex- 


as,  ordinarily,  where  the  repeal  is 
intended  by  the  legislature,  it  is  de- 
clared in  express  terms.  In  their 
absence,  the  presumption  is  always 
against  the  intention  to  repeal, 
which  ought  not  to  be  presumed, 
unless,  from  the  repugnance  of  the 
provision,  the  inference  be  necessary 
and  unavoidable  (cit.  Harford  v.  U. 
S.,  &  Cranch,  109,  op.  by  Marshall, 
C.  J.).  It  is  not  sufficient  to  estab- 
lish that  subsequent  laws  cover 
some  or  even  all  of  the  cases  pro- 
vided for  by  the  former  law;  for 
the  latter  may  be  merely  affirma- 
tive, or  cumulative,  or  auxiliary;  but 
there  must  be  positive  repugnancy 
between  the  provisions  of  the  new 
laws  and  those  of  the  old  (cit.  Wood 
v.  U.  S.,  16  Pet.  342,  363,  op.  by 
Story,  J.).  They  must  be  irrecon- 
cilable, incapable  of  standing  to- 
gether (cit.  McCoole  v.  Smith,  1 
Black  (U.  S.).  459,  470;  Arthur  v. 
Homer,  96  U.  S.  (6  Otto),  137).  The 
c Uert  of  the  Act  of  March  6,  1873 
(Arts  1873-3,  Ch.  113,  p.  95),  amend- 
ing Act  1871,  is  not  discussed.  It 
would  seem,  however,  upon  the 
reasoning  in  Davies  v.  Creighton, 
that  it,  too,  left  the  Act  of  1852  un- 
i  in  paired .  To  avoid  misunderstand- 
ing, however,  and  because  incorpo- 
ration may  probably  be  had  under 
both  acts,  the  provisions  of  the  Act 
of  1873  are  here  inserted:  "Any 
five  or  more  persons,  who  shall 
desire  to  form  a  joint  stock  com- 
pany, for  the  conduct  of  any  enter- 
prise or  business,  which  may  be  law- 
fully conducted  by  an  individual,  or 


ct'pt  to  construct  a  turnpike  to  be 
constructed  beyond  the  limits  of  a 
county,  or  railroad,  or  canal,  or  to 
establish  a  bank  of  circulation,  may 
make,  sign,  and  acknowledge,  be- 
fore any  justice  of  the  peace,  or  no- 
tary public,  or  county  judge,  or  clerk 
of  a  county  or  circuit  court,  a  cer- 
tificate in  writing,  setting  forth  the 
name  of  the  company,  the  purposes 
for  which  it  is  formed,  the  capital 
stock,  and  its  division  into  shares, 
the  amount  of  real  estate  proposed 
to  be  held  by  it,  the  place  at  which 
its  principal  office  is  to  be  kept,  and 
the  chief  business  to  be  transacted, 
and  the  names  and  residences  of  the 
officers,  who  for  the  first  year  are  to 
manage  the  affairs  of  the  company. 
This  certificate  may  be  presented  to 
the  circuit  court  of  the  county,  city, 
or  town  in  which  the  principal  office 
of  the  company  is  to  be  located,  or 
to  the  judge  thereof  in  vacation. 
The  said  court  or  judge  in  vacation 
shall  have  a  discretion  to  grant  or 
refuse  to  said  persons  a  charter  of 
incorporation,  upon  the  terms  srt 
forth  in  the  said  certificate,  or  upon 
such  other  ter.ms  as  may  be  adjudged 
reasonable.  If  the  charter  be  grunt- 
ed, it  shall  be  recorded  by  the  clerk 
of  the  said  court  in  a  book,  to  be 
provided  and  kept  for  the  purpose, 
and  shall  be  certified  by  said  clerk 
to  the  secretary  of  the  common- 
wealth, to  IK-  in  like  manner  record- 
ed in  his  office;  and  thereafter  the 
court,  or  the  judge  thereof  in  vaca- 
tion, may,  upon  the  motion  of  the 
said  company,  or  of  any  company 


§  35.]  STATUTORY    PROVISIONS    OF   THE    STATES.  97 

ceive  aid  by  advances  on  their  shares  for  the  objects  aforesaid, 
their  proper  dividends  of  the  fund  so  accumulated  in  money. 
(J)  Persons  who  wish  to  form  such  a  company  shall  sever- 
ally sign  articles  of  association,  which  shall  specially  state  the 
name  of  the  association,  the  place  in  which  its  business  is  to 
be  transacted,  the  number  of  shares  of  stock,  which  shall  not 
exceed  six  hundred,  and  the  ultimate  or  par  value  of  each 
share  of  stock,  which  shall  not  exceed  two  hundred  dollars ; 
and  shall  also  contain  the  constitution,  rules,  regulations,  and 
by-laws  of  the  association,  which  shall  not  be  inconsistent 
with  the  Laws  and  Constitution  of  this  State  or  of  the  United 
States.9 

(c)  The  officers  of  every  such  association  shall  be  a  presi- 
dent, six  directors,  a  treasurer,  a  secretary  and  three  trustees. 
The  president  and  directors  shall  constitute  a  Board  to  man- 
age the  affairs  of  the  association,  with  such  powers  as  the 
articles  shall  prescribe ;  the  duties  of  the  treasurer  and  secre- 
tary shall  be  prescribed  by  the  by-laws ;   the  trustees  shall 
hold  the  title  for  the  association  of  all  its  real  estate,  and  of 
all  real  estate  conveyed  to  secure  debts  due  the  association, 
and  shall  convey  and  release  the  same,  by  order  of  the  Board, 
as  may  be  required  by  the  articles.     The  Board  shall  take 
from  all  officers  and  trustees  of  the  company  bonds  with 
security,  payable  to  the  association  by  its  corporate  name,  in 
such  penalty  as  they  may  require.3 

(d)  A  true  copy  of  such  articles  as  are  mentioned  in  the 
second  section,  signed  by  the  officers  and  trustees  of  the  asso- 
ciation, together  with  a  statement   showing  the  time  of  its 

to  whom  heretofore  a  charter  has  Building  Association,  22  Gratt.  233 
been  granted  by  a  court,  or  on  rea-  (premium,— loan,  —  assignment  of 
sonable  notice  to  said  company,  al-  shares, — redemption, —  injunction); 
ter  or  amend  said  charter,  or  change  Edelyn  v.  Pascoe,  Ib.  826  (equity  jur- 
the  corporate  name  of  said  com-  isdiction, — winding  up);  Winches- 
pany;  and  such  alteration,  amend-  ter  Building  Association  v.  Gilbert 
ment,  or  change,  shall  be  recorded  et  al.,  23  Id.  787  (S.  P.);  Shinn  r. 
by  said  clerk,  and  in  the  office  of  Commonwealth,  32  Id.  899  (cmbcz- 
the  secretary  of  the  commonwealth,  zlement  by  secretary,— collateral  in- 
as  hereinbefore  provided  for  re-  quiry  into  corporate  existence);  Da- 
cording  charters,  and  shall  be  as  ef-  vies  &  Co.  r.  Creighton,  33  Id.  696 
fectual  and  legal,  from  that  time,  as  (Acts  of  1852,  etc.  See  supra), 
if  originally  a  part  of  said  charter."  '  Act  1852,  C.  101,  §  1. 
Deci.-iiius:  White  v.  Mechanics'  2  §  2.  8  §  3. 


98  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.   II. 

organization,  and  that  the  persons  whose  names  are  appended 
to  the  articles  are  the  officers  and  trustees  of  such  association, 
verified  by  the  oath  or  affirmation  of  the  president  and  secre- 
tary, shall  be  recorded  in  the  Court  of  the  county  or  con>' na- 
tion in  which  such  association  shall  transact  its  business ;  and 
thereupon,  the  persons  who  have  subscribed  the  articles  of 
association,  and  such  other  persons  as  shall  become  members 
thereof,  and  their  successors,  shall  be  a  body  corporate,  by 
the  name  specified  in  such  articles,  and  shall  in  all  respects 
be  bound  and  governed  by  such  articles  of  association,  and 
any  amendments  thereto,  made  in  conformity  to  the  same, 
and  such  association  shall  be  capable  in  law  of  purchasing, 
holding  and  conveying  any  real  and  personal  estate,  which 
may  be  necessary  and  suitable  for  the  business  and  purposes 
set  forth  in  the  articles  of  association ;  but  such  company 
shall  not,  at  any  one  time,  hold  real  estate  exceeding  in  quan- 
tity five  acres,  except  such  as  haa  been  received  in  satisfaction 
of  debts ;  and  the  clear  yearly  value  or  income  of  all  real  estate 
owned  by  such  company,  (other  than  that  conveyed  to  its 
trustees  as  security  for  advances  or  loans,)  shall  not  exceed 
-one  thousand  dollars.1 

(e)  It  shall  be  lawful  for  the  proper  officers  to  be  desig- 
nated in  such  articles,  to  call  in  and  demand,  from  the  stock- 
holders respectively,  the  sums  of  money  subscribed  by  them, 
at  such  time  and  in  such  payments  as  the  articles  of  associa- 
tion shall  prescribe;   and  for  failure  to  pay  such  sums  so 
demanded,  the  articles  may  provide  for  the  forfeiture  to  the 
company  of  the  stock  of  delinquent  holders.* 

(f)  Parents  may  take  and  hold  shares  in  any  such  associa- 
tion for  the  use  of  their  minor  children,  in  case  such  shares 
are  paid  for  by  the  personal  earnings  of  said  children  or  by 
gifts  made  for  such  purpose.     Married  women,  with  the  con- 
sent in  writing  of  their  husbands  first  obtained,  may  take  and 
hold,  for  their  separate  use,  and  exempt  from  the  debts  and 
contracts  of  their  husbands,  shares  in  any  such  association,  in 
case  they  are  paid  for  by  the  personal  earnings  of  said  mar- 
ried women,  or  by  those  of  their  children,  voluntarily  be- 
stowed for  this  purpose,  or  by  gifts  made  to  them  by  persons 
other  thaa  their  husbands,  and  not  otherwise ;  and  any  real 

'  §  4.  •  §  5. 


§  35.]  STATUTORY    PROVISIONS   OF   THE   STATES.  99 

estate,  acquired  by  the  proceeds  of  such  shares,  shall  be  held 
by  such  married  women  in  like  manner,  exempt  from  the 
debts  and  contracts  of  their  husbands.1 

(g)  Every  such  association,  except  sooner  dissolved  by  a 
vote  of  a  majority  of  the  stockholders,  shall  continue  in  being 
until  the  fund  accumulated,  including  shares  redeemed,  and 
all  property,  money  and  other  effects  shall  amount  to  such  a 
sum  as  will  enable  the  company  to  divide,  on  each  share,  a 
sum  equal  to  the  par  or  ultimate  value  of  the  shares  agreed 
upon  in  the  articles,  and  no  longer ;  and,  in  such  estimate,  the 
redeemed  shares  shall  be  estimated  at  their  par  or  ultimate 
value.  No  dividend  of  principal  or  profits  shall  be  made,  ex- 
cept at  the  termination  of  the  association.* 

(A)  It  shall  be  lawful  for  any  such  association  to  redeem 
the  shares  held  by  the  stockholders  respectively,  upon  such 
terms  and  under  such  regulations  as  may  be  prescribed  in  the 
articles ;  but  such  association  shall  in  no  case  receive  or  de- 
mand from  any  stockholder  interest  exceeding  the  rate  of  six 
per  cent,  per  annum  upon  the  sum  actually  paid  by  such  asso- 
ciation to  such  stockholder  for  the  shares  so  redeemed  and 
brought  in.  Nothing  herein  contained,  however,  shall  be 
construed  to  prevent  the  association  from  receiving  and  de- 
manding from  any  stockholder,  whose  shares  have  been  re- 
deemed, such  regular  payments  on  stock  as  may  be  required 
by  the  articles,  and  any  fines  that  may  be  imposed  on  him  in 
accordance  with  such  articles.' 

(i)  Any  existing  association,  formed  for  the  purposes 
mentioned  in  this  act,  may,  upon  complying  with  its  pro- 
visions, become  entitled  to  its  benefits.4 

(j )  If  the  directors  or  other  officers  of  any  association  in- 
corporated under  this  act,  shall  use,  dispose  of,  or  invest  any 
moneys  or  property  belonging  to  such  association,  otherwise 
than  is  prescribed  by  this  act,  or  by  the  articles  recorded  as 
aforesaid,  every  such  director  or  officer  who  authorized,  made, 
or  sanctioned  such  use,  disposition,  or  investment,  shall  be 
liable  to  the  association  or  to  the  person  injured  for  all  losses 
and  damages  incurred  by  reason  of  such  unlawful  use,  disposi- 
tion, or  investment.* 

(k)  If  any  officer,  trustee,  attorney,  agent,  or  servant  of 
'§6.  f§7.  »§8.  «§9.  »§10. 


100  THE  LAW  OF   BUILDING   ASSOCIATIONS.  [CH.  II. 

any  such  association  shall  apply  to  his  own  use,  or  shall,  with- 
out due  authority,  assign,  transfer,  cancel,  or  deliver  up,  or 
acknowledge  satisfaction  of  any  bond,  mortgage,  deed  of 
trust,  or  other  written  instrument  belonging  to  such  associa- 
tion, or  shall  be  guilty  of  any  fraud  in  the  performance  of  his- 
duties,  he  shall  be  liable  to  the  association  or  to  any  person 
in  jured  for  the  damages  thereby  incurred,  and  shall  also'be 
deemed  guilty  of  a  misdemeanor ;  and  upon  conviction  of  any 
such  offence,  he  shall  be  fined  in  a  sum  not  exceeding  one 
thousand  dollars,  and  be  imprisoned  in  the  county  jail  for  a 
term  not  exceeding  one  year.1 

(1)  There  shall  be  a  general  meeting  of  the  stockholders  of 
every  association  incorporated  under  this  act,  on  the  first 
Thursday  of  January  in  each  year,  for  the  purpose  of  elect- 
ing the  officers  of  the  association  for  the  ensuing  year.  But 
if  for  any  cause,  such  meeting  be  not  held  on  the  day  afore- 
said, the  company  shall  not  for  that  reason  be  dissolved,  but 
the  officers  and  trustees  previously  elected  shall  continue  in 
office  until  their  successors  are  appointed  at  some  other  meet- 
ing of  stockholders  to  be  provided  for  in  the  articles  of  asso- 
ciation. The  stockholders,  at  every  such  general  meeting,  or 
in  case  there  be  no  such  general  meeting,  then  the  president 
and  directors  of  every  such  association  shall  cause  to  be  pub- 
lished, during  the  month  of  January  in  every  year,  in  one  or 
more  public  newspapers  printed  in  or  nearest  its  place  of  busi- 
ness, a  statement,  verified  by  the  oath  or  affirmation  of  the- 
president  and  secretary,  showing  the  actual  financial  condition 
of  the  company,  brought  down  to  the  thirty-first  day  of 
December  in  the  preceding  year.  Such  statement  shall  ex- 
hibit the  amount  of  money  on  hand,  the  number  of  shares  re- 
deemed, the  amount  due  the  association,  and  its  liabilities,  if 
any,  the  value  of  its  property,  and  the  estimated  cash  value  of 
each  share  of  stock.* 

(m)  It  shall  not  be  lawful  for  any  such  association  to  loan 
to  one  of  its  members  a  sum  exceeding  the  par  or  ultimate 
value  of  the  shares  subscribed  for  by  such  member ;  and  no 
member  shall  own  at  any  one  time  more  than  twenty  shares 
of  stock.8 

(n)  The  stock  of  any  such  association  shall  be  deemed 
1  §  11.  8  §  12.  »  §  13. 


§  36.]  STATUTORY   PROVISIONS  OP  THE  STATES.  101 

personal  estate,  and  shall  pass  as  such ;  it  shall  be  transferred 
and  represented  in  meetings  of  the  stockholders  in  such  man- 
ner as  may  be  prescribed  in  the  articles.1 

(0)  The  articles  of  any  such  association  may  be  amended 
in  such  manner  as  may  be  prescribed  therein  ;  but  every  sucli 
amendment  shall  be  certified  by  the  president  and  secretary, 
and  be  recorded  in  the  court  in  which  the  original  articles 
are  recorded.* 

(p)  The  general  assembly  may  at  its  pleasure  amend, 
modify,  or  repeal  this  act,  and  may  dissolve  -any  association 
incorporated  under  its  provisions.  Every  modification  or 
amendment  of  this  act  shall  be  deemed  to  modify  or  amend 
the  charter  of  every  association  incorporated  under  its  pro- 
visions ;  but  no  act  to  amend,  modify,  or  repeal  this  act,  or  to 
dissolve  any  such  association,  shall  take  away  or  impair  any 
remedy,  existing  at  the  time  of  the  passage  of  such  act,  against 
such  association,  or  deprive  such  association  of  the  power  to 
sell  its  property,  foreclose  its  mortgages,  collect  its  debts,  dis- 
tribute its  effects,  and  to  perform  in  its  corporate  capacity  all 
other  acts  necessary  to  close  its  business.* 

§  36.  West  Virginia.4  (a)  Any  number  of  persons,  not 
less  than  five,  desiring  to  become  incorporated  as  a  homestead 
and  building  association  may  do  so,  under  the  general  Incor- 
poration Act  of  1881,6  by  signing  an  agreement  setting  forth 
such  intention,  the  name  of  the  proposed  corporation,  its  pur- 
pose, principal  office  or  place  of  business,  the  period  of  its 
expiration,  capital  stock  subscribed,  total  capital  stock,  num- 
ber and  par  value  of  shares,  name  and  residence  of,  and  num- 
ber of  shares  held  by  each  corporator, — in  the  form  prescribed 
in  said  act ;  which  agreement,  being  acknowledged  by  several 
corporators  before  a  justice,  notary,  or  judge,  and  certified  by 
such  officer,  and  the  affidavits  of  at  least  two  corporators 

1  §  14.  diately  following,  as  to  effect  of  such 

*  §  15.  certificate,  change  of  capital  stock, 

3  §  16.  acceptance  of  chapter  by  existing 

4  Luws  1881,  Ch.  54,  p.  214,  Act  corporations,  etc.,   continuance  of 
Mar.  14,  1881,  in  particular  sections  directors  in  office  until  successors 
25-29.  p.  222;  Code  of  West  Vir-  are  appointed,  first  meeting  of  stock- 
ginia,  Ch.  53.  holders,    record,    publication,    and 

5  Laws  1881,  Ch.  54,  §  2,  iii.,  and  official  certificates  of  incorporation, 
6-9.     See  also  the  sections  imme-  etc.,  §§  10-24. 


102  THE  LAW  OP  BUILDING  ASSOCIATIONS.          [CH.  II. 

named  in  the  agreement  being  annexed  thereto,  declaring  the 
bona  fides  of  the  transaction,  subscriptions,  and  understanding 
of  the  parties,  shall  be  delivered,  with  the  acknowledgments 
and  affidavits,  to  the  Secretary  of  State,  who  shall  thereupon 
issue  to  the  corporation  his  certificate  under  the  great  seal  of 
the  State,  declaring  them  to  be  a  corporation  by  the  name 
and  for  the  purposes  set  forth  in  the  agreement,  according  to 
the  form  prescribed  in  said  act. 

(b)  Homestead  and  building   associations  formed  under 
this  chapter  may  be  for  the  purpose  of  raising  money,  to  be 
used  among  the  members  of  such  corporation  in  buying  lots 
or  houses,  or  in  repairing  houses ;  and  shall  be  subject  to  the 
provisions  of  this  and  the  fifty-third  chapter  of  the  Code,  so 
far  as  the  same  are  not  inconsistent  with  the  following  sec- 
tions.1 

(c)  Such  corporations  shall  not  use  or  direct  the  funds 
thereof  for  or  to  any  other  object  or  purpose  than  those  men- 
tioned in  the  preceding  section,  and  in  case  the  said  funds 
shall  be  so  used  or  directed,  the  association  so  using  or  direct- 
ing them  stall  forfeit  all  the  rights  and  privileges  as  a  corpo- 
ration.* 

(d)  Every  such  corporation  is  authorized  to  levy,  assess 
and  collect  from  its  members  such  sums  of  money,  by  stated 
dues,  fines,  interest  on  loans  advanced,  and  premiums  bid  by 
members  for  the  right  of  precedence  in  taking  loans,  as  the 
corporation  by  its  by-laws  shall  provide ;  also  to  acquire,  hold, 
convey  and  encumber  all  such  real  estate  and  personal  prop- 
erty as  may  be  legitimately  pledged  to  it  on  such  loans,  or 
may  be  otherwise  transferred  to  it  in  the  due  course  of  its 
lawful  business :  Provided,  that  the  dues,  fines  and  premiums 
paid  by  the  members  of  such  corporation,  although  paid  in 
addition  to  the  legal  rate  of  interest  on  loans  taken  by  them, 
shall  not  be  construed  to  make  the  loans  so  taken  usurious.* 

(e)  All  the  stockholders  of  any  such  corporation  shall  be 
held  liable  to  an  amount  equal  to  the  stock  subscribed  by 
them,  or  held  by  them  at  any  time,  in  addition  to  said  stockr 
for  the  purpose  of  securing  the  creditors  of  said  association.4 

(/")  Every  such  corporation  shall  adopt  a  constitution, 
which  shall  be  signed  by  the  members  thereof,  and  which 
'§25,  p.  222.  8§26.  3  §  27.  4  §  28. 


§  37.]  tJTATUTOKY    PBOVISIONS   OF   THE   STATES.  103 

shall  embrace  a-11  the  provisions  of  the  four  preceding  sections, 
and  such  articles  for  its  government  and  the  management  of 
its  business,  as  it  shall  deem  proper :  Provided,  the  same  are 
not  inconsistent  with  the  provisions  of  the  four  preceding 
sections.1 

§  37.  Wisconsin.2  (a)  At  any  time  when  five  or  more  per- 
sons may  desire  to  form  a  mutual  savings  fund,  loan  or  build- 
ing association,  under  the  provisions  of  this  act,  they  shall 
make  and  subscribe  a  certificate  of  organization  and  shall  fik?, 
the  same  in  the  office  of  the  Clerk  of  the  Circuit  Court  of  the 
county  in  which  they  intend  to  carry  on  the  business  of  such 
corporation;  and  such  certificate  shall  specify :  1.  The  name 
assumed  by  such  association,  and  by  which  it  shall  be  known  ; 
2.  The  amount  of  its  capital  ;  3.  The  city,  village,  or  town  in 
which  such  association  designs  to  carry  on  its  corporate  busi- 
ness :  Provided,  that  such  association ;  in  making  its  loans  as 
hereinafter  provided,  may  accept  as  security  for  such  loan  or 
loans  any  property  situated  within  the  county  in  which  such 
association  carries  on  its  corporate  business,  and  that  no  char- 
ter granted  under  or  by  virtue  of  the  provisions  of  this  act, 
shall  be  for  a  longer  term  than  seven  years.3 

(b)  The  capital  stock  of  any  such  corporation  shall  not  ex- 
ceed five  hundred  thousand  dollars,  and  shall  be  divided  into 
shares  of  two  hundred  dollars  each.4  Building  associations 
whose  capital  is  limited  to  less  than  five  hundred  thousand 
dollars,  may,  by  resolution,  carried  by  a  vote  of  at  least  two 
thirds  of  the  members  of  such  association  present  at  any  reg- 
ular meeting  thereof,  increase  the  amount  of  its  capital  to  any 
amount  not  exceeding  the  sum  of  five  hundred  thousand  dol- 
lars, including  the  amount  mentioned  in  the  certificate  of  or- 
ganixation  of  such  corporation:  Provided,  that  no  such  vote 
shall  be  taken,  unless  such  resolution,  stating  the  amount  of 
the  proposed  increase  of  capital,  shall  have  been  offered  at  the 
regular  meeting  next  preceding  the  one  at  which  such  vote 
is  taken.6  The  secretary  of  such  association  or  corporation 

1  §  29.  *  Laws  1878,  C.  253,  Act  Mar.  18, 

*  Revised  Statutes  of  Wisconsin,  1878. 

1878,  Ch.  93,  §§  2010-2014;  Act  Mar.  *  Rev.  Stat.,  §  2010. 

18,  1878,  Laws  1878,  C.  253,  p.  518;  5  Laws  1878,  C.  254,  §  1,  Act  Mar. 

Act   Mar.  18,  1878,  Laws  1878,  C.  18,  1878. 
•:r>4.  p.  519. 


104  THE   LAW   OF   BUILDING  ASSOCIATIONS.         [CH.  II. 

shall,  immediately  after  any  such  resolution  as  is  mentioned  in 
the  preceding  section  shall  have  been  adopted,  file  in  the  of- 
fice of  the  Clerk  of  the  Circuit  Court  in  and  for  the  county  in 
•which  such  association  or  corporation  carries  on  its  corpora- 
tive business,  u  certified  copy  of  such  resolution,  and  nhall 
state  in  such  certificate  the  date  of  the  adoption  of  such  reso- 
lution, and  from  and  after  the  filing  of  such  certificate  as 
aforesaid,  such  association  or  corporation  may  issue  capital 
stock  up  to  the  amount  specified  in  such  resolution,  in  the 
same  manner  as  if  the  amount  of  capital  specified  in  such  res- 
olution had  been  originally  specified  in  the  certificates  of  or- 
ganization of  such  association  or  corporation.1  Payments  on 
such  stock  shall  be  made  in  instalments  of  not  exceeding  two 
dollars  each,  on  each  share,  at  such  time  and  place  as  the  by- 
laws shall  prescribe ;  and  every  share  of  stock  shall  be  sub- 
ject to  a  lien  for  the  unpaid  instalments  and  other  charges 
incurred  thereon.  The  by-laws  shall  pi-escribe  the  form  and 
manner  of  enforcing  such  lien.  The  stock  may  be  issued  in 
one  or  more  successive  series,  in  such  amount  as  the  Board  of 
Directors  or  the  stockholders  may  determine,  and  new  shares 
of  stock  may  be  issued,  in  lieu  of  shares  withdrawn  or  for- 
feited. Any  stockholder  wishing  to  withdraw  from  the  cor- 
poration may  do  so  by  giving  thirty  days'  notice  of  his  inten- 
tion, and  shall  then  be  entitled  to  receive  the  amount  paid  in 
by  him,  and  such  proportion  of  the  profits  as  the  by-laws  may 
prescribe,  less  all  fines  and  other  charges,  due  such  corpora- 
tion ;  but  no  stockholder,  whose  stock  is  held  in  pledge  for 
security  shall  be  allowed  to  withdraw ;  and  at  no  time  shall 
more  than  one  half  of  the  funds  then  in  the  treasury  be  ap- 
plicable to  the  demands  of  withdrawing  stockholders,  without 
consent  of  the  board  of  directors.  Upon  the  death  of  a 
stockholder,  his  legal  representative  shall  be  entitled  to  re- 
ceive the  full  amount  paid  in  by  him,  and  legal  interest 
thereon,  first  deducting  all  charges  that  may  be  due  on  the 
stock;  but  no  fines  shall  be  charged  to  a  deceased  member's 
account  after  his  decease,  unless  his  legal  representatives  shall 
have  assumed  his  future  payments  on  the  stock.* 

(<?)  The  by-laws  of  every  such  corporation  shall  provide 
for  the  ratio  and  manner  of  voting  of  its  members,  and  fix  the 
1  Laws  1878,  C.  254,  §  2,  Act  Mar.  18,  1878.  •  Rev.  Stat.,  §  2010. 


§  37.]  STATUTORY    PROVISIONS   OF  TIIE   STATES.  105 

time  for  holding  periodical  meetings,  at  which  the  money  in 
the  treasury,  if  more  than  two  hundred  dollars,  shall  be  of- 
fered for  loan  in  open  meeting,  and  the  stockholder  who  shall 
bid  the  highest  premium  for  the  loan,  shall  be  entitled  to  a 
loan  of  at  least  two  hundred  dollars  for  each  share  of  stock 
held  by  him,  but  not  exceeding  the  sum  then  in  the  treasury, 
and  offered  for  loan,  upon  giving  good  and  ample  security 
upon  property  situated  in  the  county,  where  such  corporation 
is  located,  for  the  repayment  of  the  loan :  Provided,  that  a 
stockholder  may  borrow  such  fractional  part  of  two  hundred 
dollars  as  the  by-laws  may  prescribe.  In  case  the  borrower 
shall  neglect  to  offer  security,  or  shall  offer  security  that  is  not 
approved  by  the  board  of  directors  within  the  time  pre- 
scribed by  the  by-laws,  he  shall  be  charged  with  one  month's 
interest,  together  with  any  expense  incurred,  and  the  money 
shall  be  reloaned  at  the  next  periodical  meeting.  In  case  of 
nonpayment  of  instalments  or  interest  by  borrowing  stock- 
holders, for  the  space  of  six  months  after  due,  payment  of  the 
whole  principal  and  interest,  without  deducting  the  premium 
paid,  or  interest  thereon,  may  be  enforced  by  proceedings  on 
their  securities,  according  to  law.1 

(cT)  A  borrower  may  repay  a  loan  at  any  time,  and,  in  case 
of  repayment  thereof,  before  the  expiration  of  the  term  for 
which  the  loan  was  made,  there  shall  be  refunded  to  such 
borrower  such  proportion  of  the  premium  paid,  as  the  part  of 
the  term  unexpired  bears  to  the  whole  term  of  the  loan ;  and 
when  a  loan  is  collected  by  process  of  law,  and  the  amount 
collected  by  the  corporation  exceeds  the  amount  taken  by  the 
borrower,  with  the  interest  and  charges,  the  money  shall  be 
reloaned  at  the  next  periodical  meeting,  and  the  excess  recov- 
ered, beyond  the  amount  required  to  pay  the  loan,  with  inter- 
est and  charges,  shall  be  returned  to  the  borrower,  from  whom 
the  money  was  collected,  or  his  legal  representatives ;  but,  in 
case  the  corporation  shall  have  issued  its  stock  in  series,  such 
reloan  shall  be  made  only  to  the  stockholders  of  the  same 
series,  and  if  the  premium  received  for  the  re-loan  shall  be 
greater  than  that  originally  given  by  the  defaulting  borrower, 
no  part  of  such  excess  of  premium  shall  be  paid  to  him.  Any 
defaulting  borrower  may,  at  any  time  after  the  securities 
1  Rev.  Stat.,  §  2011. 


106  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  IL 

given  by  him  have  been  collected  by  such  corporation,  with- 
draw his  stock  upon  the  same  terms  prescribed  in  section 
2010 ; '  but  the  corporation  may  retain  out  of  the  moneys 
due  upon  such  withdrawal  so  much  as  may  be  requisite  to 
save  it  from  loss,  in  case  the  amount  so  collected  shall  not  be 
sufficient  to  pay  his  loan  with  interest  and  charges.' 

(e)  No  premiums,  fines,  or  interest  on  such  premiums  that 
may  accrue  to  any  such  corporation  under  the  provisions  of 
this  chapter  shall  be  deemed  usurious.' 

(f)  Every  such  corporation  may  purchase,  at  sheriff's  or 
other  judicial  sale,  or  at  any  other  sale,  public  or  private,  any 
real  estate  upon  which  it  may  have  or  hold  any  mortgage, 
judgment,  lien,  or  other  encumbrance,  or  ground  rent,  or  in 
which  it  may  have  any  interest,  and  sell,  convey,  lease,  or 
mortgage,  at  pleasure,  the  real  estate  so  purchased.4 

States  in  which  Building  Associations  are  Incorporated  by  Special 
Acts.     Connecticut. 

§  38.  Among  the  remaining  States  there  are  only  a  few  in 
which  building  associations  are  at  all  extensively  known.  In 
Connecticut,*  indeed,  there  has  been  much  legislation  and  a 
number  of  decisions '  on  the  subject ;  but  the  institution  has 

1  See  ante  (6).  ers  not  protected,— Act  1855.— no 

*  Rev.  St.,  §  2012.  retroactive   efficacy, — membership 
8  Rev.  St.,  §  2013.  merely  for  purpose  of  getting  loan); 

4  Rev.  St.,  §  2014.  Peoples'  Savings  Bank  and  Building 

5  See  Statutes    of    Connecticut,  Association  «.  Collins,  27  Conn.  145 
Compilation  of  1854,   p.   218,  Act  (plea  of  nul  tiel  corporation,— bor- 
1850;  Act  June  29,  1855,  Laws  of  rower  estopped  from, — estoppel  ex- 
Conn.,    1855,    Ch.    18,    p.    19;  Act  tends  to  persons  claiming  under  lien, 
July  9,   1864,  Laws  1864,   Ch.  74,  — plea  of   usury   personal, — appli- 
§   1,    p.    99;    Act    July    30,    1868,  cation  of  stock  to  payments  to  mort- 
Laws  1868,  p.  196;  Act  July  1,  1869,  gage);  West  Winsted  Savings  Bank 
Acts  1869,    p.    231;   Act  June  29,  and  Building  Association  v.  Ford, 
1870,  Laws  1870,  p.  383;  Act  July  Ib.  282,  and  Same  v  Rice,  Ib.  293 
22,   1870,    Laws  1870,  p.  502;   Act  (plea    to    merits  admits    corporate 
July  24,  1872,  Laws  1872,  p.  21.  character  of  plaintiff, — formalitiesof 

•  See  Mechanics'  and  Working  incorporation, — plea  of  nul  tiel  cor- 
Men's  Mutual   Savings  Bank   and  poration, — borrowing  member   es- 
Building    Association    v.    Meriden  topped  from  such  plea, — defective 
Agency  Co.,  24  Conn.  159  (stock  mortgage  reformed) ;  Babcock  et  al. 
subscription,  and  ultra  vires, — loan  0.  The  Middlesex  Savings  Bank  and 
to  one  not  a  member  not  protected);  Building  Association,  28  Conn.  302 
Same  v.  Wilcox,  Ib.  147 (Act  1850, —  ("net  value"   of  shares, — rights  of 
usury, — premium, — loans  to  outsid-  deceased  members  representatives). 


38.] 


STATUTORY    PROVISIONS   OF   THE   STATES. 


107 


died  out,  and  seems  to  have  been  finally  prohibited  by  law.1 
In  Arkansas,*  Delaware,  Georgia,'  Kentucky,4  South  Caro- 
lina,* Tennessee,"  and  some  other  States,  it  appears  to  be  the 
practice  to  incorporate  building  associations  by  special  acts  of 
legislature. 


1  I  have  a  statement  to  that  effect 
very  kindly  furnished  me  by  Geo. 
G.  Sill,  Esq.,  of  Hartford,  formerly 
Lieutenant-Governor  of  Connecti- 
cut; and  see  Act  July  24,  1872. 

8  Decision:  Odd  Fellows'  Build- 
ing Association  -v.  Hogan,  28  Ark. 
261  (allegation  of  corporate  existence 
in  suit  against  building  association). 

3  Exemption  from  taxation  on 
stock:  see  Code  1873,  Act  1869,  p. 
13.  Decisions:  Bibb  County  Loan 
Association  v.  Richards,  21  Ga.  592 
(nature  of  building  associations, — 
loans, — incorporation  by  articles); 
Richards  v.  Bibb  County  Loan  As- 
sociation, 24  Id.  198  (loan, — foreclo- 
sure,— computation);  Parker  v.  The 
Fulton  Loan  and  Building  Associa- 
tion, 42  Id.  451  (usury  may  be  re- 
covered); Same  v.  Same,  46  Id.  166 
(usury, — loan, — purpose  of  building 
associations, — settlement  bars  recov 
ery  of  usury) ;  City  Loan  and  Build 
ing  Association  v.  Goodrich  et  al., 
48  Id.  445  (premature  winding  up, 
— equity  jurisdiction) ;  Ocmulgee 
Building  and  Loan  Association  v. 
Thomson,  52  Id.  427  (membership 
of  borrower, — terms  of  repayment, 
— credit  for  stock);  Goodrich  et  al.  v. 
The  City  Loan  and  Building  Asso- 
ciation, 54  Id.  98  (see  City  Loan 
and  Building  Association  v.  Good- 
rich et  al..  supra);  Redwine  v.  The 
Gate  City  Loan  and  Build  ing  Asso- 
ciation, Ib.  474  (court,  when  applied 


to  for  incorporation,  may  specify 
objects,  if  not  set  forth  in  petition); 
Thomson  v.  Ocmulgee  Building  and 
Loan  Association,  56  Id.  350  (see  Oc- 
mulgee, etc.,  v.  Thomson,  supra, — 
temporary  suspension  of  business); 
Pattisou  v.  The  Albany  Building 
and  Loan  Association,  63  Id.  373 
(corporate  existence  cannot  be  col- 
laterally attacked, — plea  of  usury 
must  conform  to  statute, — member's 
liability  for  losses  and  expenses, — 
negligence  in  settlement.) 

4  Decisions:  Herbert,  etc.,  v.  Ken- 
ton  Building  and  Savings  Associa- 
tion, 11  Bush.  296  (loans, — usury); 
Shelley  v.  The  Newport  Savings  As- 
sociation, Ib.  305  (building  associa- 
tion instituting  an  action  must  give 
bonds  for  costs);  Gordon,  etc.,  v 
Winchester  Building  and  Accumu 
lating  Fund  Association,  12  Id.  110- 
(purpose  of  incorporation  must  be 
served, — loans, — usury,— legislature 
cannot  authorize  a  set  of  corpora- 
tions to  take  usury). 

6  Decision:  Columbia  Building 
and  Loan  Association  v.  Bollinger, 
12  Rich.  Eq.  124  (loan,— usury). 

6  Decision-  Martin  v.  Nashville 
Building  Association  et  al.,  2  Cold. 
418  (loans, — usury, — declared  pur- 
pose of  legislature  the  guide  in  con- 
struing validity  of  by-laws,  etc. ;  if 
their  practical  operation  defeats  that 
purpose  they  are  void). 


108  THE  LAW   OF  BUILDING   ASSOCIATIONS.        [CH.  111. 


CHAPTER  III. 

DEFINITION   AND   VARIETIES  OF  BUILDING  ASSOCIATIONS. 

§  39.  Definition  of  building  associations. 

§  41.  Terminating  societies. 

§  42.  Method  of  obtaining  loans. 

£  44.  Bowkett  societies. 

§  45.  Starr-Bowkett  societies. 

§  46.  Permanent  societies,  strictly  so-called. 

§  47.  Serial  societies. 

Definition  of  Building  Association. 

§  39.  A  building  association,  then,  is  a  private  corpora- 
tion,1 erected  for  such  a  period  of  time  as  may  be  permitted 
by  the  laws  under  which  it  is  incorporated,  for  the  accumula- 
tion, from  fixed  periodical  contributions  of  its  shareholders 
and  the  profits  upon  their  investment,  of  a  fund,  to  be  ap- 
plied, from  time  to  time,  in  accommodating  such  shareholders 
with  loans,  or  advancements,  for  the  purpose,  primarily,  of 
acquiring  the  free  possession  of  real  estate,  and  constructing 
dwellings,3  under  terms  and  regulations,  sanctioned  by  ex- 
perience, and  prescribed  by  legislation,  and  the  charter  and 
by-laws  of  the  association,  upon  principles  of  strict  mutuality 
and  equality  of  benefits  and  obligations,  with  the  effect  of 
gradually  extinguishing  the  liability  incurred  for  such  loans 
and  advancements  simultaneously  with  the  prescribed  con- 
tinuance of  the  shareholder's  periodical  contributions  upon 
the  stock  held  by  him  in  the  association ;  the  said  periodical 
contributions  being  so  calculated  as  to  amount,  in  the  aggre- 
gate, at  compound  interest,  to  the  par  value  of  all  the  shares, 
as  agreed  upon  at  the  formation  of  the  society,  and  fixed  by 
its  charter,  within  the  period  allowed  for  the  anticipated  dura- 

1  As  to  unincorporated  building  Kupfert  v.  Guttenberg  Building  As- 

associations,  see  post,  ch.  xx.  sociation,  30  Pa.  St.  465;  Jarrett 

1  This  element  has  been  repeated-  v.  Cope,  68  Pa.  St  67.  See  also 

ly  held  to  be  an  essential  feature  in  Kindersley,  V.  -C.,  in  re  Kent  Bene- 

the  constitution  of  a  building  asso-  fit  Building  Society,  1  Dr.  and  Sm. 

ciation,  without  which  it  could  not  417;  7  Jur.,  N.  S.  1045;  80  L.  J.,  Ch. 

properly  claim  to  be  such.  See  785:  9W.  R.  686;  4L.  T.,  N.  S.  610. 


§  40.]  DEFINITION   AND   VARIETIES.  100 

tion  of  the  society,  or  the  continuance  of  the  contributions,' 
after  deduction  of  all  necessary  expenses  of  the  business. 

§  40.  It  was  originally  assumed,  that  all  the  stockholders 
would  at  some  period  become  borrowers  to  the  full  extent  of 
their  presumptive  interest  in  the  association's  finally  accumu- 
lated fund.  It  was  not  intended  to  allow  capitalists,  under 
pretence  of  philanthropy,  or  upon  any  other  ground,  to  ob- 
tain for  their  money  a  greater  interest  than  could  be  got 
through  the  ordinary  channels  of  investment.3  Therefore, 
whilst,  in  practice,  a  large  percentage  of  the  members  of 
building  associations  do  not  become  borrowers,  but  remain 
merely  investors,  yet  the  results  of  the  scheme  which  follow 
as  to  them,  are,  in  reality,  only  incidental,  and  form  no  part 
of  the  proper  definition  of  the  institution.  For  them,  it  is 
merely  a  co  operative  savings  fund,  or  loan  fund  association, 
into  which  they  make  their  stated  payments,  in  due  season 
receiving  back  their  money,  increased  by  the  accumulations 
of  an  unusually  high  rate  of  interest.  The  shares  of  all  the 
members,  be  they  borrowers  or  investors,  advance,  of  course, 
at  the  same  rate,  and  reach  the  same  ultimate  value  at  the 
same  time.  In  the  case  of  the  former,  that  value  has  been 
anticipated,  drawn  in  advance.  They  have  nothing  more  to 
look  for,  (unless,  indeed,  they  hold  a  larger  number  of  shares 
than  whose  par  value  is  equal  to  the  amount  borrowed  by 
them,  and  are,  as  to  such  excess,  merely  investors,)  except  to 
be  released  from  any  subsisting  liability  for  what  they  have 
already  received.  The  latter  have,  as  yet,  taken  nothing. 
Their  money  has  gone  on  accumulating,  until,  the  shares  hav- 
ing attained  to  their  fixed  value,  they  are  entitled  to  receive 
that  amount  in  payment  of  them.  It  is,  therefore,  practically 
and  legally  quite  immaterial,  whether  that  period  of  maturity 
be  described  as  the  period  when  the  funds  of  the  society  shall 
be  sufficient  to  distribute  a  certain  sum  to  all  its  stockholders, 
or,  when  it  shall  be  sufficient,  after  cancelling  the  obligations 
of  borrowing  members,  to  distribute  that  sum  to  the  unad- 
vanced  members."  But  it  would  be  incorrect  to  suppose,  that 
the  latter  is  the  supreme  object  of  the  building  association 

1  See  post.,  "  Serial  Societies,"  §  47. 

1  Barry,  Law  of  Building  Societies,  p.  3.  §  4. 

3  "White  v.  Mechanics'  Building  Association,  22  Qrattan  (Va.).  233. 


110  THE   LAW   OF    BUILDING    ASSOCIATIONS.         [CH.  III. 

scheme.  It  is  merely  a  result.  The  principal  aim  is  to  pro- 
vide for  its  members,  desirous  of  owning  homesteads,  the 
opportunity  of  obtaining  advancements,  with  facilities  for 
gradual  liquidation,  not  elsewhere  to  be  obtained,  which, 
together  with  the  mutuality  of  the  whole  plan,  amply  com- 
pensates for  the  apparent  exorbitancy  of  premiums  and  inter- 
est, keeping,  however,  in  constant  view  the  interests  of  the 
investor  as  well  as  of  the  borrower.  "  These  associations  are 
founded  on  mathematical  calculations,  and  a  close  scrutiny  of 
their  charters  will  show  that  their  rules  are  based  upon  the 
highest  principles  of  equity  and  fairness."  '  The  results  which 
they  achieve  are  arrived  at  by  various  methods,  constituting 
so  many  different  species  of  the  genus  building  association. 
A  brief  notice  of  them  is  necessary  at  this  point. 

Terminating  Societies. 

§  41.  The  least  complicated  form  of  the  scheme  is  exhib- 
ited in  what  is  now  known  in  England  as  the  Terminating 
Building  Society,"  simply,  and  is  the  one  usually  adopted  in 
this  country  under  the  statutes  of  the  various  States,  which, 
as  a  rule,  prescribe  the  period  for  which  charters  can  be 
granted  to  such  organizations. 

A  number  of  persons,  usually  limited,  by  statute,  as  to  the 
minimum  in  number,  and  frequently  as  to  the  maximum  of 
value  which  each  can  represent,  form  themselves  into  a  soci- 
ety, of  which  they  become  members  by  subscribing  for  one 
or  more  shares  of  a  certain  paid-up  value,  and  not  exceeding 
in  aggregate  the  total  capital  stock  allowed  such  societies  by 
law  and  by  their  several  charters.  Upon  each  share  a  fixed 
monthly  subscription  of  uniform  amount  is  payable  through- 
out the  whole  duration  of  the  society,  the  purpose  being  to 
continue  the  same,  until  the  members'  subscriptions,  by  the 
aid  of  investments  made  from  time  to  time,  shall  amount  to 
a  fund  large  enough  to  give  to  every  member,  upon  every 
share  held  by  him,  a  sum  fixed  by  the  charter  at  the  com- 
mencement. The  length  of  the  association's  possible  continu- 
ance is  limited  by  law  or  by  charter,  and  the  payments  required 
from  the  shareholders  so  adjusted  as  to  guarantee,  on  the 

1  Ocmulgee   Building   and    Loan     ing  Societies,  pp.  31-33;  Davis,  Law 
Association  v.  Thomson,  52  Ga.  427.     of  Building,  etc.,  Societies,  pp.  54- 
9  Compare  Barry,  Law  of  Build-     56. 


§  42.]  DEFINITION   AND   VARIETIES.  Ill 

score  of  long  experience,  its  running  out  within  that  period. 
The  members  all  start  from  the  same  date,  and,  should  any 
one  be  permitted  to  join  the  society  subsequently  to  the  time 
limited  for  taking  subscriptions,  he  will  be  required  to  make 
a  "  back-payment "  of  an  amount  equivalent  to  the  then  value  of 
the  stock  held  and  paid  on  from  the  beginning.  Whenever 
the  society  has  on  hand  a  sum  equal  to  the  full  value  of  a 
share,  or,  when  by  law  required,  at  stated  intervals,  loans  will 
be  made  to  members,  (or  outsiders,  if  that  be  permitted,) 
upon  sufficient  security,  an  assignment  of  stock  held  by  the 
borrower  to  the  association  being  usually  required  by  way  of 
collateral  security.  The  member  then,  in  addition  to  the 
regular  subscription,  pays,  also  monthly,  the  legal  interest 
upon  the  full  face  value  of  his  loan,  or  upon  the  amount 
actually  received  by  him,  according  as  the  one  or  other  may 
be  demanded  under  the  statutes  of  the  several  States,  and  both 
these  duties  are  stipulated  in  the  mortgage,  which  becomes  avail- 
able for  their  enforcement  in  the  hands  of  the  association. 

Method  of  obtaining  Loans. 

§  42.  The  method  of  obtaining  the  loan  is  peculiar,  and 
thereon  depends  largely  the  success  of  this  class  of  money- 
lending  institutions.  When  the  time  has  arrived  for  loaning 
money,  it  is  put  up,  in  sums  equal  to  the  full  paid-up  value 
of  a  share,  at  auction ;  and  the  members  desiring  the  loan 
bid,  in  competition,  the  amount  they  are  willing  to  allow  as 
a  discount,  "bonus,"  or  "premium,"  for  the  preference. 
This  premium  is  included  in  the  obligation  given  by  the 
borrower,  who  makes  himself  liable  for  the  payment  of  the 
full  amount  to  the  association.1  Thus,  if  the  amount  offered 
be  $1000,  in  five  loans  of  $200  each,  (that  being  the  par  value 
of  the  shares,)  and  the  premium  bid  be  $30  on  each  loan,  the 
person  receiving  the  advancement  would  execute  his  obliga- 
tion to  the  society  for  $1000,  taking  from  it  but  $850 ;  in 
other  words,  he  receives  $850,  and  agrees  to  repay  it,  together 
with  a  premium,  or  bonus,  of  $150.  ,It  is  understood  that 
he  has  the  right  to  make  this  payment  in  the  proceeds  of  his 
stock  in  the  society,  when  it  has  reached  its  ultimate  value, 
and,  in  the  mortgage  or  bond  he  gives  for  the  loan,  he  stipu- 
lates to  keep  up  his  payments  upon  such  stock  ;  and,  usually, 
1  See  post,  ch.  xii. 


112  THE  LAW  OF  BUILDING   ASSOCIATIONS.        [CH.  III. 

he  assigns  the  stock  itself  as  collateral  security.  When  the 
association  is  wound  up,  the  borrower's  stock  is  set  oif  against 
his  debt,  and,  the  two  being  equal,  both  are  cancelled.  J'ra--- 
tically,  therefore,  there  is  no  difference  between  this  method 
and  that  which,  instead  of  requiring  an  obligation  for  the 
actual  repayment  of  the  money  advanced,  and  the  premium, 
retains  the  latter  out  of  the  amount  offered  for  loan,  and 
requires  security  for  the  continuation  of  the  stock  and  other 
payments,  and  interest,  till  the  society  shall  have  run  out. 
And,  again,  it  is  but  doing  the  same  thing,  under  a  slightly 
different  guise,  where  the  building  association  makes  the  loan 
by  purchasing  or  "  redeeming"  a  shareholder's  shares  at  the 
lowest  bid,  advancing  that  sum  to  him,  and  taking  his  secur- 
ity for  the  payment  of  monthly  instalments  upon  the  whole 
stock,  together  with  interest,  etc.  The  bidding  is  done  in 
reversed  order.  The  association  has  a  certain  amount  of 
money,  with  which  it  offers  to  redeem  its  own  stock,  in  ad- 
vance of  the  period,  when,  by  charter  limitation  and  the 
accumulation  of  profits,  it  will  become  necessarily  redeem- 
able. The  member  desiring  to  take  the  money,  offers  his 
shares  to  be  redeemed  by  the  association.  He  who  offers  his 
stock  at  the  lowest  figure,  gets  the  loan,  his  shares  are  re- 
deemed at  once  by  the  association,  at  the  figure  at  which  he 
offers  them ;  but  he  binds  himself  to  continue  his  regular 
payments,  interest,  and  fines,  till  the  expiration  of  the  society, 
and  he  remains  in  it  as  a  member  (a  so-called  "  redeemed " 
member),  subject  to  its  rules,  by-laws,  and  constitution.1 

§  43.  Each  member  is  entitled  to  receive  a  loan,  if  he  can 
offer  sufficient  security,  and  the  amount  he  receives  (and  for 
which  he  gives  his  obligation)  may  be  nominally  equal  to  (but 
not  ordinarily  beyond)  the  paid-up  value  of  his  whole  stock- 
interest.  If  he  receives  more,  his  stock  payments  will  be 
proportionately  increased. 

Bowkett  Societies. 

§  44.  The  Bowkett  and  Starr-Bowkett  Building  Associations 
are  terminating  varieties  of  limited  popularity.  The  former 

1  See  Franklin  Building  Associa-     Martin,  2  Beas.  (N.  J.)  428.     And 
tion  v  Marsh,  5  Dutch.  (N.  J.)  225;     see  post,  §§  14&-148,  and  ch.  xii. 
Iloboken  Building   Association  «. 


§  45.J  DEFINITION'    AND    V.UUETIES. 

are  best  described  in  the  language  of  the  originator,  Dr.  Bow- 
kett,  in  his  evidence  before  the  royal  commissioners  in  Eng- 
land1: u  They  are  based  on  a  principle  of  arithmetic  which 
scarcely  any  one  connected  with  building  societies,  or  any  one 
else,  seems  to  comprehend.  The  principle  is  this  :  That,  by  a 
certain  arrangement,  men  uniting  together  can  realize,  in  the 
tirst  instance,  the  same  amount  of  interest  for  their  own  sav- 
ings, that  they  are  accustomed  to  pay  for  other  people's 
money ;  next,  that  they  can  practically  obtain  one-fourth 
more  than  that  rate  of  interest ;  and  next,  that  that  rate  of 
interest  is  compound  interest.  The  plan  is  this :  One  hun- 
dred persons,  putting  down  tyd.  a  week,  will  produce  £2  Is. 
2d.  each  year.  Leaving  the  1*.  2d.  out  of  the  question,  to 
pav  the  current  expenses  (and  that  amount  is  nearly  sufficient), 
they  have,  at  the  end  of  the  year,  £200  ;  they  draw  lots  for  it, 
and  the  one  to  whom  it  falls  has  the  £200  lent  to  him,  without 
interest,  provided  he  expends  it  upon  freehold  property,  and 
repays  it  at  the  rate  of  £10  per  cent,  per  annum,  continued 
for  ten  years.  After  that  Ike  continues  his  subscription,  until, 
if  he  is  one  of  the  earlier  persons,  he  has  paid  £62,  and  if  one 
of  the  later  ones,  £50.  Each  member  has  all  his  subscription 
1  >ack  again,  the  principle  being,  that  the  subscriber  lends  the 
society  a  small  sum  annually  for  a  long  time,  and  the  society 
lends  him  a  large  one  for  a  long  time." 

Starr-Bowkett   Societies. 

§  45.  "  The  chief  difference,"  says  Mr.  Davis,8  "  between 
the  Starr-Bowkett  Societies  and  the  preceding  is  that,  in  the 
Starr-Bowkett  Societies,  after  a  man  has  repaid  that  which  1  in- 
been  lent  to  him  upon  property,  he  has  to  pay  an  increased 
subscription,  so  as  to  make  the  society  terminate  at  an  earlier 
period  than  it  would  do  if  the  member  still  continued  to  pay 
his  ordinary  subscription.  Thrs,  a  man  who  lias  an  advance 
of  £300  pays  back  at  the  rate  of  £30  a  year,  and  a  subscrip- 
tion of  Is.  3^7.  a  week,  or  £3  5s.  per  annum.  At  the  end  "f 
ten  years  he  would  have  repaid  the  £300,  and  paid  into  the 
society,  in  subscriptions,  £32  10s.  The  society  now  says,  in 
order  to  enable  other  members,  who  have  been  waiting, 

1  First  Report  of  Commissioners,         4  Davis.  Lnw  of  Building,  etc.,  So- 
p.  64.  cietios.  p.  59. 


114  THE  LAW  OF  BUILDING   ASSOCIATIONS.        [CH.  III. 

and  are  still  anxious  to  get  their  appropriations,  to  do  so,  and 
to  make  the  society  terminate  as  quickly  as  possible,  we  think 
it  is  only  right  that  you  should  make  up  your  pmp.irri..n  of 
subscription,  viz.,  £81  5*.,  by  paying  at  the  rate  of  £30  a  \ 
during  the  next  two  years.  The  result  is,  that  at  the  end 
of  eleven  and  a  half  years  from  the  time  the  man  borrowed 
the  money,  he  has  repaid  the  £300  lent  to  him,  and  he  Jia> 
£81  5*.  subscription  in  the  society.  At  the  close  of  the 
society  these  subscriptions  are  returned  to  the  members," 
after  deduction  of  a  proper  amount  for  his  share  of  the  work- 
ing expenses. 

Members  who  have  obtained  an  appropriation,  i.e.,  a  right 
to  have  an  advance,  frequently  sell  that  privilege  to  others 
for  a  premium.  In  such  case  the  rate  of  interest  practically 
paid  by  the  purchaser,  i.e.,  the  borrower,  may  become  enor- 
mous, and  this  benefit  does  not  accrue  to  the  society. 

Permanent  Societies,  strictly  so  called. 

§  46.  The  Permanent  Building  Association,  strictly  so 
-called,  is  not  of  frequent  occurrence  (if  at  all  known)  in  this 
country,  the  statutes  regulating  these  institutions  and  pro- 
viding for  their  incorporation,  in  the  various  States,  generally 
limiting  their  duration  to  a  comparatively  short  period.  It 
seems,  however,  in  England,  to  be  now  the  most  approved 
form  of  what  is  there  known  as  the  Benefit  Building  Society. 
It  is  described  as  "  a  society  which  has  not  by  its  rules  any 
fixed  date,  or  specified  result  at  which  it  shall  terminate." ' 
Shares  are  issued,  upon  which  the  various  members  make 
payments,  either  in  one  sum,  when  the  share  is  said  to  be 
*  paid  up,'  or  by  periodical  or  other  sums,  the  interest,  in  either 
case,  being  allowed  to  accumulate  until  the  share  has  reached 
the  full  value  prescribed  by  the  rules,  or  else  paid  out  yearly 
to  the  member,  as  he  may  prefer.  Advances  are  made  to 
members,  repayable  by  small  periodical  instalments,  extend- 
ing over  a  fixed  term  of  years,  and  the  rules  generally  allow 
the  borrower  to  choose  any  term,  from  three  to  twenty  years, 
over  which  his  repayments  may  be  spread  equally.  The 
great  difference  between  permanent  and  terminating  societies 
consists  in  this,  that  whereas,  in  the  latter,  a  person  must 

1  37  and  38  Viet.,  Ch.  42,  s.  5. 


•§  47.]  DEFINITION   AND   VARIETIES.  115 

either  become  a  member  at  the  time  the  society  is  established, 
or  else  pay  a  large  amount  of  back  subscriptions ;  in  the  for- 
mer, he  may  become  a  member  at  any  time,  without  making 
any  such  payment.  And  the  former  class  oifers  many  advan- 
tBges  to  both  investing  and  borrowing  members,  which  a 
terminating  society  cannot  offer.  In  a  permanent  society  the 
investors  can  always  ascertain  the  exact  length  of  time  during 
which  they  will  have  to  pay  their  subscriptions,  if  the  regular 
payment  be  enforced  by  fines ;  and  it  is  always  comparatively 
easy  to  ascertain  the  amount  to  which  any  investing  member, 
who  may  wish  to  withdraw,  is  entitled ;  whilst  in  a  terminat- 
ing society,  the  members  will  be  unable  to  calculate,  with  any 
degree  of  certainty,  how  long  the  society  will  exist,  and,  con- 
sequently, how  long  they  will  be  required  to  subscribe,  and  it 
will  be  absolutely  necessary  to  impose  fines  on  those  members 
who  do  not  pay  their  contributions  regularly.  But  it  ^s  to 
the  borrowing  member  that  the  permanent  system  holds  out 
the  greatest  inducements  for  it  enables  him  to  extend  his  re- 
payments over  any  fixed  number  of  years,  at  his  own  choice, 
with  the  absolute  certainty  of  clearing  his  property  from  the 
encumbrance,  and  freeing  himself  from  all  further  liability, 
at  the  end  of  that  time,  and  to  feel,  when  he  mortgages  it, 
that  he  can  redeem  it  at  any  time,  on  payment  of  a  sum  easily 
calculated,  and  that  whether  the  society  prove  successful  or 
not.1 

Serial  Societies. 

§  47.  A  modification  of  this  plan  is  of  frequent  occurrence 
in  America  in  the  shape  of  serial  associations,"  i.e.,  asso- 
ciations, which,  their  duration  being  limited,  instead  of  issuing 
all  the  stock,  to  the  full  extent  allowed  by  law  or  charter,  at 
once,  divide  it  up  into  series,  and  issue  them  successively, 
each  class,  or  series,  being  then  treated,  to  some  extent,  as  a 
separate  association  distinct  from  the  others,  but  with  them 
sharing  in  the  profits  of  the  concern.  A  society  founded  on 
this  plan  will  issue  as  many  shares  as  are  thought  advisable 
during  the  first  year,  and  those  will  run  their  course  to  the 
final  result,  precisely  as  those  issued  by  a  society,  on  the  plan 
first  described.  At  the  end  of  the  first  year,  the  total  number 
1  Davis,  Law  of  Building,  etc.,  9  Compare  Davis,  Law  of  Build- 
Societies,  pp.  60-61.  ing,  etc.,  Societies,  pp.  61-62. 


116  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [cH.  III. 

of  shares  of  this  "  first  series"  participates  in  the  profits,  their 
value  is  ascertained,  and  a  new  or  "  second  series"  is  issued  of 
as  many  shares  as  it  appears  advisable  to  sell.  The  payments 
<>n  this  second  series  commence  with  their  issue,  and  they 
may,  in  their  turn,  run  the  same  course  as  the  "first  series," 
till,  at  the  end  of  the  second  year,  the  sum  total  of  the  income 
for  it  is  divided  by  the  whole  number  of  shares  in  both  series, 
and  their  value  again  ascertained.  Thus  the  shares  of  the 
first  series  will  be  found  to  have  the  value  of  two  years'  sub- 
scriptions, to  which  is  added  the  profit  made,  during  the  two 
years,  on  each  share ;  while  the  shares  of  the  second  series 
will  be  worth  the  amount  of  only  one  year's  subscription  and 
one  year's  profit ;  and  so  on,  each  year  producing  a  new  series 
of  stock,  and  the  sum  total  of  subscriptions  and  profits  being 
divided,  at  the  end  of  each  year,  by  the  number  of  shares  of 
all  the  series  then  issued  (with  the  exception,  of  course,  of 
such  shares  as  may  have  been  withdrawn).  By  the  time  the 
eighth,  ninth,  or  tenth  series  is  issued,  according  to  the  success 
of  the  society,  the  first  series  will  have  reached  its  ultimate 
value,  and  its  members  will  receive  that  amount  in  cash,  or, 
if  they  be  borrowers,  its  equivalent  by  cancellation  of  their 
loans.  Suppose,  therefore,  that  the  society  has  twenty  years 
to  run,  then,  from  the  first  to  the  tenth  year,  the  society 
issues  a  new  series  of  shares  every  year,  and  after  that,  a 
series  is  cancelled  every  year. 

§  48.  It  is  not,  of  course,  imperative  that  the  space  of  a, 
year,  or  of  a  year  only,  should  elapse  between  the  issuing  of 
the  various  series.  Any  time  which  will  allow  the  series  to 
run  out  within  the  legal  life  of  the  association,  is  short 
enough ;  whilst,  in  some  instances,  new  series  are  started 
semi-annually,  monthly,  and  even  weekly.1 

§  49.  It  has  been  said  that  these  associations  are  limited 
as  to  the  period  of  their  duration.  Yet  they  belong,  in  prin- 
ciple, to  the  permanent  class.8  It  is  the  serial  issue  of  stock 
which  constitutes  the  permanent  feature.  For,  although  the 
membership  of  any  individual  terminates  with  the  series  of 
stock  on  which  that  membership  is  claimed,  yet  the  associa- 

1  Any  particular  period  or  inter-  4  Wrigley,  The  Workinirman's 
val  may,  of  course,  be  prescribed  Way  to  Wealth  (a  Treatise  on  Build- 
by  statute  for  the  issuing  of  series.  ing  Associations),  pp.  32,  seqq. 


§  50.]  FORMATION   OF   BUILDING   ASSOCIATIONS.  117 

tion  continues  on,  until  the  last  series  is  wound  up.  Upon 
the  terminating  principle,  both  the  membership  and  the  asso- 
ciation terminate  at  one  and  the  same  time. 


CHAPTER  IY. 

FORMATION   OF   BUILDING  ASSOCIATIONS. 

§  50.  Preliminary  expenses. 

§  51.  Choice  of  the  society's  name. 

§  52.  Framing  of  rules,  articles,  or  constitution. 

§  54.  Matters  to  be  provided  for  in  rules. 

§  55.  Various  methods  of  incorporation. 

§  56.  Incorporation  by  letters  patent  from  the  Executive. 

§  57.  Incorporation  by  Special  Act  of  Legislature. 

§  59.  Latitude  in  framing  rules,  etc.,  where  incorporation  is  by  patent 
or  special  act. 

§  60.  Incorporation  by  decree  of  Court. 

§  61.  Incorporation  by  voluntary  association. 

§  63.  Necessity  in  every  case  of  substantially  complying  with  require- 
ments of  statute. 

§  64.  Powers  contained  in  articles,  in  excess  of  statute,  void,  and 
cause  of  forfeiture. 

§  65.  Power  of  Legislature  to  modify  charter  by  subsequent  enact- 
ments. 

§  66.  Retroactive  and  expository  statutes. 

§  67.  Statutes  affecting  remedies  only. 

Preliminary  Expenses. 

§  50.  When  a  building  association  is  about  to  be  formed, 
upon  any  of  the  foregoing  plans,  it  is  important  that  the  per- 
sons having  the  enterprise  in  hand  should  attend  (1)  to  keep- 
ing down  the  preliminary  expenses,  as  of  advertising,  etc. ; 
and  (2)  to  having  a  memorandum  signed  by  all  of  them,  to 
share  the  expenses  equally,  and  to  indemnify  one  another 
against  individual  liability  for  more  than  a  due  proportion  of 
such  expenses.  For  the  various  members  of  the  managing 
committee  of  an  inchoate  undertaking,  of  whatever  kind,  are, 
on  the  principle  of  partnership,  liable,  jointly  and  severally, 
for  the  particular  engagements  which  each  has  contracted  in 
endeavoring  to  form  the  association.1  Nor  is  this  liability 

1  Hutton  v.  Thompson  and  Norris     17  L.  T.  Rep.  237,  261;  Bright  t. 
«.  Cooper,  3  H.  L.  Cas.  161;  S.  C.,     Hutton,  3  H.  L.  Cas.  341;  8.  C.,  16 


118  THE  LAW   OP   BUILDING   ASSOCIATIONS.        [CH.  IV. 

taken  away  or  changed  by  the  subsequent  incorporation,  and 
an  agreement  of  the  corporation  to  pay  according  to  the  term* 
of  the  original  contract,  if  the  contract  should  be  completed.1 

Choice  of  the  Society's  Name. 

§  51.  The  first  thing  to  be  done,  supposing  the  scheme  to 
meet  with  encouragement  from  a  sufficient  number  of  sub- 
scribers, is  to  choose  a  name.  Herein,  it  must  be  remem- 
bered, (1)  that  no  society  will  receive  a  charter  from  the 
State,  whose  name  is  identical  with,  or  bears  a  close  and  mis- 
leading resemblance  to,  one  belonging  to  a  subsisting  organi- 
zation ;*  (2)  that  a  corporation  cannot,  however,  by  use 
acquire  an  exclusive  right  to  use,  in  its  title  of  incorporation, 
a  general  term  descriptive  merely  of  the  locality  with  which 
its  business  is  connected  ;8  and  (3)  that  an  improper,  or  pre- 
judicial assumption  of  a  title,  misleading  as  to  identity,  and 
not  simply  descriptive  of  locality,  may  be  restrained  in  equity. 

Framing  of  Rules,  Articles,  or  Constitution. 

§  52.  The  next  step  is  the  framing  of  rules  or  articles, 
which  are  to  be  the  basis  of  the  society's  existence  and  gov- 
ernment, and  which,  in  general,  must  undergo,  at  least  in  their 
most  essential  points,  the  inspection  and  approval  of  the  in- 
corporating authority,  and  subsequently  become,  whether 
embodied  in  the  instrument  of  incorporation,  or  merely 
adopted  in  pursuance  of  it,  the  organic  law  of  the  associa- 
tion. This  organic  law,  wherever  found,  is  generally  called 
the  constitution, — rules  and  regulations  subsequently  adopted 
for  the  internal  government  of  the  society,  in  accordance 
with  the  constitution,  the  by-laws.  The  importance  of 

Jur.  695;  L.  T.  Rep.  249;  Kelner  v.  Johnston  v.  Scott,  22  Dunlop,  393; 

Baxter,  L.  R,  2  C.  P.  174;  Reynall  32  Sc.  Jur.  174. 

v.  Lewis  and  Wyld  v.  Hopkins,  16  '  Brogleset  al.  «.  McCoy,  5  Sneed 

L.  J.,  Ex.  25;  S.  C.,  15  M.  and  W.  (Tenn.),  602;  Kelner  *.  Baxter,  L. 

517;  Maddick  v.  Marshall,  17  Com.  R,  2  C.  P.  174. 

B.,  N.  S.  (112Engl.  C.  L.  R.)  829;  *  See  Field,  on  Corporations,  § 

Hamilton  v.  Smith,  28  L.  J.,  Ch.  24,  p.  31,  note  4. 

404;  Burbridge  v.  Norris,  34  L.  J.,  3  See  Colonial  Life  Assurance  Co. 

Ex.  131;  Riley  v.   Packington,  16  v.  Home  and  Colonial  Assurance  Co. 

L.  T.  Rep.,  N.  S.  382;  Hopcrofft  (Lim.)33L.  J.,  Ch.  741;  10  Jur.,  N. 

v.  Parker,  16  L.  T.  Rep.,  N.  S.  123,  S.  967;  10  L.  T.  Rep.,  N.  S.  448;  12 

561.      Otherwise  in  Scotland;  see  W.  R  783. 


§54.]  FORMATION   OF  BUILDING   ASSOCIATIONS.  119 

drawing  them  with  care  and  forethought,  following  gome 
approved  model  which  has  stood  the  test  of  practical 
experience,  requires  no  demonstration.  English  judges 
have  complained  bitterly  over  the  negligence  displayed 
in  the  wording  of  the  laws  of  building  associations,  framed 
"so  ignorantly  and  absurdly  that  they  perplex  the  under- 
standings of  the  ablest  men."1  And  much  of  what  is  to 
follow  in  this  treatise  will  be  evidence,  that,  in  this  country  > 
too,  great  difficulties,  and  questions  so  embarrassing  as  to  in- 
volve the  necessity  of  tedious  and  expensive  litigation,  in 
order  to  their  definitive  settlement,  have  frequently  arisen 
from  badly  worded  or  carelessly  inserted  provisions  in  the 
constitution  or  by-laws  of  the  associations. 

§  53.  In  the  exercise  of  the  general  powers  incident  to 
corporations,  the  regulations,  modifications,  restrictions  con- 
tained in  the  charter,  or  organic  law  of  the  society,  adopted 
in  pursuance  of,  or  as  the  basis  of  an  application  for,  the 
charter,  will  be  binding  upon  it  in  the  future,  and  serve  as  a 
guide  to  the  courts,  in  questions  of  right  arising  upon  their 
operation.  In  those  particulars,  however,  in  which  special 
legislation,  applicable  to  this  kind  of  associations,  has  super- 
seded the  discretion  of  individuals  forming  and  magistrates 
sanctioning  the  incorporation,  the  charter  must  clearly  and 
distinctly  follow  the  enactment,  or  else  be  void,  pro  tanto, 
and  expose  the  association  to  a  forfeiture  of  franchises  at  the 
instance  of  the  Attorney-General." 

Matters  to  be  provided  for  in  Rules,  etc. 

§  54.  Subject  to,  and  following  such  statutory  enactment, 
every  constitution  should  contain  adequate  provisions  on  the 
following  heads : 

1.  The  name  of  the  society,  its  purposes,  and  place  of 
business. 

2.  The  amount  of  capital  stock  and  number  of  shares  to 
be  issued  by  the  society,  and  their  paid-up  value. 

3.  The   terms  and   conditions  upon  which,  consistently 

1  Hatherly,   V.-C.,   in  Smith  «.  peal,  3  Eq.  Rep.  14;  3  De  G.,  M.  & 

Pilkington,  4  Jur.,  N.  S.  58,  62;  30  G.  997. 

L.  T.  Rep.  196.     See  also  Fleming  9  Upon  this  question,  and  that  of 

v.  Self,  18  J.  P.  296;  23  L.  T.  Rep.  the  relations  of  the  charters  to  the 

63;  Kay,  518,  and  S.  C.,  upon  ap-  general  law,  see  post,  §§  479-481. 


120  THE   LAW   OF   BUILDING  ASSO.  LATIOXS.          j<  II.  IV. 

with  the  general  law,  shares  will  be  issued  to  persons  desirous 
ot'  becoming  member.-. 

4.  The  personal  prerequisites  of  membership ;    its  duties ; 
the  amount  to  be  paid  periodically  during  its  continuance  ;  the 
officer  and  place  to  whom  and  when-  payable  ;  the  liability  of 
delinquent  members  to  the  imposition  of  lines,  and  amount 
thereof,  and  to  forfeiture  of  membership  ;  the  terms  of  such  for- 
feiture, and  provisions  for  voluntary  withdrawal  of  members. 

5.  The  manner  of  obtaining  and  making  loans ;'  the  per- 
sons entitled  to  receive  them ;  the  amount  receivable  on  each 
share  subscribed  ;  the  terms  and  security  ;  the  time,  place,  and 
recipient  of  payments  of  interest,  and  the  amount  from  time 
to  time  payable ;  provision,  in  case  of  default  of  payment,  and 
for  voluntary  repayment  of  loans. 

6.  The  government  of  the  society ;  its  officers  and  direc- 
tors ;  their  duties,  powers,  terms,  remuneration,  and  removal ; 
the  method  and  time  of  their  nomination  and  election ;  the 
number  of  votes  each  shareholder  is  entitled  to  cast  ;3  proxies. 

7.  Provision  for  annual  or  more  frequent  audit  of  the 
accounts,  and  inspection,  by  the  auditors,  of  the  mortgage  and 
other  securities  held  by  the  society. 

8.  Time,  and,  if  possible,  place  of  annual  meetings ;  num- 
ber of  members  whose  presence  required  to  make  a  quorum  ;* 
provision  for  calling  special  meetings. 

9.  Provisions   for  enactment,   alteration,   and    rescission 
of  by-laws,  and  alteration  and  amendment   cf  constitution, 
within  the  limits  allowable  by  law. 

10.  Duration  and  manner  of  terminating  the  society. 

Various  Methods  of  Incorporation. 

§  55.  The  act  of  incorporation  may  be  consummated  (1) 
by  the  Executive  of  the  State  issuing  his  patent,  by  virtue  of 
powers  vested  in  him  by  statute,  upon  presentation  to  him 
properly  made  under  the  same;  (2)  by  special  legislative 

1  The  fixing  of  a  minimum  pre-  the  number  of  his  shares.     Barry, 

mium  is  illegal  when  the  law  directs  Law  of  Building  Societies,  p.  28. 

the  granting  of  the  loan  to  the  high-  And  this  rule  seems  to  be  very  gen- 

est  bidder.  erally  followed. 

*  It  has  been  customary,  in  build-  3  As  to  what  constitutes  a  quo- 
ing  associations,  to  give  each  mem-  rum,  see  post,  §§  186-187. 
ber  one  vote  only,  no  matter  what 


§  57. J  l-OUMATIOX    OF    BUILDING    ASSOCIATIONS.  121 

enactment ;  (3)  by  decree  of  court,  proceeding  in  accordance 
with  and  under  the  authority  of  general  laws ;  (4)  by  the 
operation  of  law,  endowing,  by  virtue  of  statutes  passed  for 
that  purpose,  with  the  character  and  capacities  of  a  body 
corporate,  persons  desirous  of  acquiring  the  same,  who  have 
authenticated  and  legitimated  their  act  of  association,  in 
accordance  with  the  statutory  requirements. 

Incorporation  by   Letters  Patent  from  the   Executive. 

§  56.  Where  a  charter  is  granted  by  the  Executive,  the 
constitution  of  the  association  is,  subject  to  the  declared  in- 
tention of  the  corporators  and  the  laws  of  the  State,  the 
creature  of  their  will.  With  that  intention,  with  the  pur- 
poses of  the  incorporation,  and  with  the  terms  of  the  statutes 
under  which  it  was  effected,  it  must  in  every  particular  cor- 
respond, and  its  validity,  in  whole  and  in  part,  depends  upon 
such  correspondence.  When  once  properly  established,  it 
becomes  binding  upon  the  association,  but  may,  from  time  to 
time,  be  altered  and  amended,  in  such  manner  as  the  statute 
and  its  own  provisions  may  authorize,  consistently  with  all 
the  limitations  to  which  the  corporation  may  be  liable.  The 
charter,  in  such  case,  is  entirely  distinct  from  the  constitution. 
It  is  merely  the  patent  of  the  Executive,  announcing  the  per- 
sons named  therein,  with  their  associates  and  successors,  to  be 
a  corporation  under  and  subject  to  the  statute  which  enables 
him  to  confer  corporate  franchises  for  the  purposes  declared 
therein. 

Incorporation  by  Special  Act  of  Legislature. 

§  57.  Charters  granted  by  special  act  of  the  Legislature 
usually  prescribe,  in  detail,  the  powers  intended  to  be  given 
to  the  corporation,  as  well  as  the  manner  of  exercising  the 
same,  leaving  the  regulation  of  minor  matters  to  its  discrete  >n, 
by  giving  it  the  power  of  passing  by-laws  for  its  government. 
The  charter  itself,  in  such  case,  embraces  the  constitution  of 
the  society.  The  establishment  of  the  corporation,  and  the 
giving  of  its  constitution,  are  one  and  the  same  enactment, 
and  the  authority  to  make  by-laws  being  delegated,  they  must 
be  neither  inconsistent  with  the  intention  of  the  Legislature, 
nor  in  conflict  with  the  spirit  of  that  enactment.  The  same 


122  THE  LAW  OF  BUILDING  ASSOCIATIONS.        [CH.  IV. 

rule  obtains  when  the  power  of  amendment  of  the  constitu- 
tion, or  charter,  is  given  to  the  corporation.  Both  amend- 
ments and  by-laws,  if  they  be  improper,  and  contravene  the 
purpose  intended  to  be  subserved  by  the  Legislature,  are 
void. 

§  58.  In  Georgia  it  has  been  held  competent  for  the  Legis- 
lature to  incorporate  a  building  association  by  its  constitu- 
tion and  by-laws  (it  having  been  in  existence  and  in  business 
previously  under  those  rules),  without  the  same  being  em- 
bodied in  the  act.1  They  were  a  fixed  quantity  at  the  time, 
readily  ascertainable,  and  by  the  reference  of  the  act  to  them, 
became  essentially  a  part  of  its  substance. 

Latitude  in  Framing  Rules,  etc.,  where  Incorporation  is  by  Patent  or 
Special  Act. 

§  59.  In  none  of  these  cases  is  much  latitude  conceded  to 
the  association  in  the  framing  of  its  rules.  Where  the  incor- 
poration is  by  patent,  granted  by  the  Executive  under  a  general 
law,  its  provisions,  sufficiently  searching  and  detailed,  point 
out  a  straight  and  narrow  path,  within  whose  limits  the  crea- 
ture of  that  law  must  move."  When  the  Legislature  assumes 
to  dictate  a  constitution  to  the  corporation  it  is  establishing, 
the  freedom  of  the  latter's  actions  is  still  more  closely  hedged 
in.  But  the  Legislature  may  content  itself  with  granting  to 
an  association  a  corporate  existence,  defining  the  purpose  of 
the  enactment,  giving  general  powers,  and  the  right  to  estab- 
lish a  constitution  and  pass  by-laws  for  the  regulation  of  the 
details  of  the  scheme.  In  such  a  case,  the  criterion  of  the 
legality  of  the  whole  or  any  part  of  the  constitution  or  by- 
laws, which  may  thereafter  be  adopted,  may  be  entirely 
whether  or  not  their  practical  operation  is  such  as  to  carry 
out  the  expressed  intention  of  the  Legislature  in  creating  the 
corporation.  Thus,  the  Legislature,  having  declared  the  object 

1  Bibb  County  Loan  Association  tain    class    of    corporations,    viz. : 

v.  Richards,  21  Ga.  592.  Building   Associations,    authorized 

J  Under  a  provision  of  the  Con-  to  be  incorporated,  must  be  treated 

stitution  of  Nebraska,  that  "  no  bill  as  a  nullity.     Lincoln  Building  and 

shall  contain  more  than  one  subject,  Savings    Association,   appellee,    v. 

and  the  same  shall  be  clearly  ex-  Graham,    appellant,    7    Neb.    173; 

pressed  in  its  title,"  the  words  "and  Same  v.  Benjamin  &  Benjamin,  Ib. 

other  purposes"  added  to  the  title  of  181. 
a  bill  denning  the  objects  of  acer- 


§  60.]  FORMATION    OF  BUILDING   ASSOCIATIONS.  123 

of  the  building  association  incorporated  by  its  act  to  be  to 
''  assist  members  thereof  to  become  their  own  landlords,"  and 
the  practical  operation  of  the  constitution  and  by-laws  passed 
thereunder,  to  which  the  act  gave,  in  advance,  "the  force 
and  effect  of  legal  enactment,"  appearing  to  be  principally 
the  taking  of  usury  upon  loans,  to  the  oppression  of  the  bor- 
rowers, and  frustration  of  the  declared  intention  of  the  enact- 
ment, seeking,  by  the  complication  of  the  transactions,  to 
escape  the  laws  of  usury,  it  was  held  that  the  constitution 
and  by-laws  were  inoperative  and  void.1 

Incorporation  by  Decree  of  Court. 

§  60.  When  the  incorporation  is  the  act  of  the  Court,  un- 
der general  laws,  and  the  petition,  upon  which  the  decree  is- 
based,  sets  forth  the  fundamental  rules,  or  constitution,  by 
which  the  association  sought  to  be  invested  with  corporate 
franchises  is  to  be  governed,  the  decree  upon  such  petition, 
referring  to  it,  makes  it,  as  a  whole,  a  part  of  itself.  If  the 
petition  to  Court,  for  the  purpose  of  obtaining  a  charter,  un- 
der a  general  law,  should  fail  to  set  forth  the  object  of  the 
corporation,  it  is  competent  for  the  Court,  in  granting  its  as- 
sent, to  specify  the  objects,  and  to  set  forth  the  terms  on 
which  the  charter  is  granted.4  The  constitution,  then,  be- 
comes an  integral  element  of  the  charter,  this  term  being  un- 
derstood to  mean  the  instrument,  deed,  or  decree,  conferring 
upon  a  body  of  men  the  franchises  and  capacities  incident  to 
united  action  as  a  corporation.  It  can  be  changed  only  by 
the  power  which  ordained  and  sanctioned  it,  or  by  the  Legis- 
lature itself.  If,  therefore,  it  contain  a  provision  for  amend- 
ment, such  provision  can  avail  only  to  prescribe  the  propor- 
tion of  members  whose  consent  shall  be  deemed  necessary, 
and  the  mode  of  its  expression,  in  order  to  entitle  the  corpo- 
ration to  take  such  steps  as  will  secure  the  desired  amendment 
of  the  constitution  to  be  sanctioned  by  the  competent  au- 
thority. 

1  Martin   v.    Nashville  Building  Legislature  to  grant  the  privilege  of 

Association,  2  Cold.   (Tenn.)  418;  usury  to  certain  corporations,   see 

and  see,  to  the  same  effect,  Herbert,  post,  §  383,  and  ch.  xii. ,  passim. 

etc.,  v.  Kenton  Building  and  Savings  8  Redwine  ».  The  Gate  City  Loan 

Association  of  Covington,  11  Buch.  and  Building  Association,   54  Ga. 

(Ky.).  296.     As  to  the  right  of  the  474. 


THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  IV. 

Incorporation  by  Voluntary  Association. 

§  61.  Analogous  in  every  respect  is  the  position  of  a  cor- 
poration having  legal  existence  by  virtue  of  the  dne  execu- 
tion of  articles  of  association,  setting  forth  the  fundamental 
aims  and  laws  of  the  society,  acknowledged,  deposited,  and 
authenticated  in  accordance  with  the  provisions  of  a  general 
statute,  whose  effect,  thereafter,  is  to  confer  upon  the  associ- 
ates the  corporate  franchise. 

§  62.  The  requirement,  in  either  of  these  cases,  to  place 
on  record,  with  extraordinary  guarantees  of  publicity,  these 
rules,  this  constitution,  as  part  of  the  charter,  and  as  the  basis 
of  the  granting  of  the  same,  as  well  as  of  its  continuance, 
make  their  substance  matter  of  public  property,  as  well  as  of 
public  notoriety,  binding  alike  upon  the  members  of  the  as- 
sociation among  themselves,  upon  the  association  as  against 
the  world,  and  upon  the  latter,  to  the  extent  of  compelling  it 
to  take  notice  of  the  stipulations  thus  published.  A  power 
of  amendment  other  than  that  laid  down  would  defeat  this 
very  object,  and  work  injustice  to  the  corporation  and  to  the 
community  at  large. 

Necessity,  in  Every  Case,  of  Substantially  Complying  with  Require- 
ments of  Statute. 

§  63.  Whatever  the  method  of  incorporation  may  be,  it  is 
necessary,  that,  when  it  is  prescribed  by  a  general  statute,  in- 
dicating the  various  steps  and  prerequisites  in  the  process  of 
incorporation,  its  terms  be  substantially  complied  with ;  and 
that,  under  all  circumstances,  every  stage  of  the  proceeding, 
as  well  as  the  whole  enterprise,  be  characterized  with  perfect 
good  faith.  For  whilst  it  is  a  general  rule,  that  a  charter, 
once  granted  under  color  of  authority,  cannot  subsequently 
be  questioned  collaterally ;  yet  it  is  at  all  times  liable  to  the 
interference  of  the  State  (even  in  the  absence  of  misuse  of  the 
franchise),  upon  the  ground  of  irregularity  or  fraud  in  the 
procuring  of  it. 

Powers  Contained  in  Articles,  in  Excess  of  Statute,  Void,  and  Cause 
of  Forfeiture. 

§  64.  If  the  charter  of  a  building  association,  or  what  is 
called  its  constitution,  contain  the  grant  of  powers  contrary  to 
the  laws,  or  the  Constitution,  of  the  State  or  the  United  States, 


§  05.]  FORMATION    OF   BUILDING   ASSOCIATIONS.  125 

or  in  excess  of  what  the  statutes  regulating  the  formation  and 
powers  of  such  organizations  sanction,  the  objectionable  grant 
is  simply  void.  Each  such  illegal  feature  may  become  the  basis 
of  a  proceeding  by  the  State  against  the  society,  and  result  in 
the  forfeiture  of  the  franchise. 

Power  of  Legislature  to  Modify  Charters  by  Subsequent  Enactments. 
§  65.  The  act  of  incorporation  having  been  performed  ac- 
cording to  law,  and  the  charter  accepted  by  the  association,  a 
compact  is  struck,  as  to  all  its  lawful  provisions,  between  the 
State  on  the  one  side,  and  the  association  on  the  other.  That 
compact  is  binding  upon  both.  The  society  cannot  deviate 
from  it ;  nor,  whilst  its  observance  is  unexceptionable,  can  the 
State  impair  it  by  adding  new  terms  and  conditions  inconsist- 
ent with  its  reasonable  construction.1  But  where  the  Con- 
stitution of  the  State,  or  the  general  or  special  statute  under 
which  the  charter  is  granted,  reserves  to  the  Legislature  the 
power  to  alter,  modify,  or  repeal,  that  prerogative  becomes 
part  of  the  original  contract,  and  remains  in  the  State,  even 
if  no  clause  to  that  effect  be  inserted  in  the  charter  itself.* 
Such  alterations  or  modifications  are  to  be  made  in  accordance 
with  the  forms  prescribed  by  the  Constitution  in  force  when 
they  are  made,  and  not  with  those  prescribed  at  the  time  the 
charter  was  granted.3  But  the  coq^oration  has  a  discretion 
to  accept  or  reject  the  grant  as  amended,  and  new  franchises 
granted  to  existing  corporations  are  inoperative  as  to  them 
until  accepted.4  The  acceptance  muct  be  unqualified,  not 
partial,5  and  a  refusal  may  be  at  the  peril  of  forfeiture  of  the 
corporate  franchise."  Statutes  requiring,  in  order  to  affect 
any  particular  corporation,  an  acceptance  to  be  filed  by  it, 
cannot  lend  it  any  advantage  before  being  so  accepted.7 

1  Angell  and  Ames,  Corp.,  §  31.  Bourgignon    Building   Association 

9  Angell  and  Ames,  Corp. ,  §  767.  v.   Commonwealth,    10  W.   N.   C. 

The  imposition  of  a  tax  on  the  capi-  (Pa.)  161. 

tal  stock  was  held  justified  by  such         3  Angell  and  Ames,  Corp.,  §  767; 

a   reservation,    notwithstanding    a  cit.  In  the  matter  of  the  Reciprocity 

supplemental  act  had  exempted  the  Bank,  29  Barb.  (N.  Y.)  369. 

capital  stock  and  dividend  of  that         *  Field,  Corp.,  §  50. 

class  of  corporations.     Union    Im-         5  Field,  Corp.,  §  50. 

provement   Company   v.   Common-         *  Field  Corp. ,  §  46. 

wealth,   69  Pa.    St.   140.     See  also        T  Angell  and  Ames,  Corp.,  §  82. 


126  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CII.  IV. 

Retroactive  and  Expository  Statutes. 

§  66.  But  such  additional  and  altering  provisions,  whether 
by  constitution  or  statute,  can  have  no  retroactive  efficacy.1 
Hence,  a  building  association,  incorporated  under  a  statute 
which  does  not  legalize  certain  reservations  in  its  loans,  will 
derive  no  support  from  a  statute  passed  subsequently  to  the 
making  of  such  contracts,  which  authorizes  the  formation  of 
building  associations  having  that  particular  power.  It  has, 
therefore,  been  held  in  Pennsylvania,  that  building  associa- 
tions incorporated  in  that  State,  under  acts  previous  to  that 
of  1859,  which  was  the  first  to  allow  reservations  upon  loans, 
amounting,  practically,  to  the  taking  of  usurious  interest,  were 
not  aided  in  the  enforcement  of  such  contracts  by  that  act  ;* 
and  this,  notwithstanding  the  Legislature,  in  the  passage  of  that 
act,  attempted  to  extend  its  provisions,  retroactively,  upon 
loans  made  before  it  took  effect,  by  declaring  such  to  have 
been  the  meaning  and  intention  of  the  earlier  acts,  which  had, 
by  the  Supreme  Court  of  the  State,  been  adjudged  inade- 
quate to  sanction  the  practice.'  An  expository  statute,  which 
is  substantially  in  the  nature  of  a  mandate  to  the  court  to 
construe  and  apply  a  former  law,  not  according  to  judicial, 
but  according  to  legislative  judgment,  is  inoperative,  and  can- 
not control  the  courts  in  interpreting  the  law  and  declaring 
what  it  is.  The  making  of  statutory  laws,  and  their  exposi- 
tion and  application  to  cases  as  they  arise,  are  clearly  and  dis- 
tinctly two  different  functions.  The  former  is  allotted  to  the 
Legislature ;  the  latter  to  the  courts.  Such  retroactive  and 
expository  efficacy  cannot  be  conceded  to  any  law.4  Where, 
therefore,  a  general  statute,  under  which  charters  are  granted 
to  building  associations,  has  received  judicial  interpretation 

'Field,  Corp.,   §  46;    cit.  West  Blackburne's  App.,  Ib.  160:  Houser 

Wisconsin   R.  Co.  «.    Supervisors,  v.  Hermann  Building  Association,  41 

35  Wis.  257;  Hamilton  v.  Keith,  5  Pa.  St.  478. 

Bush  (Ky.)  458;  Griffin  0.  The  Ken-  »  Kupfert  t.   Guttenberg  Build- 

tucky  Co.,  3  Id.  592.  ing  Association,    CO    Pa.    St.   465; 

9  Marble  Building  Association  v.  Hughes's  App..  Ib.  471. 

Hocker,  3  Phila.  (Pa.)  494;  Denny  4  The  Lincoln   Building  and  Sav- 

«.  West  Philadelphia    Saving  and  ings  Association,  appellee,  t.  Gra- 

Building  Association,  39  Pa.  St.  154;  ham,  appellant,  7  Neb.  173;  Same, 

Premium  Fund  Association's  App.,  appellee,  v.  Benjamin  &  Benjamin, 

Ib.    156;    Reiser    v.  William    Tell  appellants,  Ib.  181. 
Building     Association,     Ib.     137; 


§  67.]  FORMATION   OF   BUILDING   ASSOCIATIONS.  127 

as  to  the  nature  of  the  powers  conferred,  it  is  incompetent 
for  the  Legislature  to  change  that  settled  interpretation  by  en- 
actment ;  for  the  Legislature  has  no  power  to  direct  the  judi- 
ciary in  the  interpretation  of  acts  previously  passed,  or  to  re- 
quire it  to  change  the  construction  already  put  upon  them. 
Doubts  upon  previous  statutes  may  be  explained  by  legisla- 
tive enactment,  but  no  new  interpretation  arbitrarily  forced 
upon  the  judiciary,  for  this  would  be  the  substitution  of  the 
language  and  meaning  of  the  one  for  the  other.1 

Statutes  Affecting  Remedies  only. 

§  67.  The  same  objection  does  not  hold  when  the  Legisla- 
ture, having  the  power  to  alter,  etc.,  charters  already  granted, 
does  not  assume  to  make  any  change  in  the  actual  state  of  the 
law,  but  confines  itself  to  declaring  explicitly  what  it  is,  and 
to  modifying  merely  the  remedy  under  it.  Thus  in  Indiana, 
the  first  act  providing  for  the  incorporation  and  regulation  of 
building  associations,8  had  reserved  to  the  Legislature  the 
right  to  change  or  repeal,  from  time  to  time.  The  later  act = 
repealed  the  former  one,  but  gave  building  associations,  hav- 
ing commenced  proceedings  under  the  same,  the  right  to  pro- 
ceed, thereafter,  according  to  the  provisions  of  this-  later  act. 
It  also  contained  a  provision  that  "  no  premium,  fine,  or  in- 
terest on  such  premiums  that  may  accrue  to  the  said  corpora- 
tion, according  to  the  provisions  of  this  act,  shall  be  deemed 
usurious,  and  the  same  may  be  collected  as  debts  of  like 
amount  are  now  by  law  collectable  in  this  State."  This  pro- 
vision was  held  applicable  to  corporations  continued  in  exist- 
ence by  said  act,  and  not  inconsistent  with  the  Constitution  of 
the  State  of  Indiana;  because,  it  was  said  by  the  Court,  it 
made  no  change  in  the  law  as  it  had  previously  existed,  but 
merely  declared,  in  plain  language,  what  the  law  was  on  that 

1  See    cases     in    preceding  two  p.  273),   declared  constitutional  in 

notes,  and  also  Greenough  v.  Green-  Stein    and    wife    v.    Indianapolis 

ough,  1  Jones  (Pa.)  495;  Lamberton  Building,  Loan  Fund,  and  Savings 

v.  Logan,  2  Bin.  (Pa.)  257;  O'Con-  Association,  18  Ind.  237. 
nor  v.   Warner,   4  Watts  &  Serg.         "Act  11  March,   1875   (1  R  S. 

(Pa.)  227.  1876,  p.  243). 

8  Act  5  March,  1857  (1   G.  &  H., 


128  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.  V. 

subject ;  and  if  it  made  any  change  in  the  law,  it  was  one 
which  affected  only  the  remedy,  and  such  an  one  it  was  com- 
petent for  the  Legislature  to  make.1 


CHAPTER  V. 

MEMBERSHIP   IN   BUILDING   ASSOCIATIONS. 

§  68.  Mode  of  acquiring  membership. 

§  69.  Persons  capable  of  acquiring  membership. 

§  70.  Powers  of  infants  and  married  women  under  enabling  statutes. 

§  72.  Status  of  husband  of  feme  sole  member  at  common  law. 

g  73.  Status  of  executor  and  administrator  of  deceased  member. 

§  75.  Building  association  cannot,  of  course,  become  a  member  in 

another  building  association. 

§  76.  A  person  may  become  member  merely  to  obtain  loan. 
§  77.  Depositors. 

§  78.  Stock  book  primary  evidence  of  membership. 
§  79.  Society  estopped  from  denying  a  person's  membership. 
§  81.  Borrower  est.opped  from  denying  hia  membership.     Exception. 
§  82.  Termination  of  membership. 

Mode  of  Acquiring  Membership. 

§  68.  Membership  in  a  building  association  is  acquired  in 
the  same  manner  in  which  membership  is  acquired  in  other 
corporations, — by  becoming  the  holder  of  its  stock.  The 
division  of  the  membership  into  two  classes,  investors  and 
borrowers,  has  already  been  noticed  as  a  result  of  the  opera- 
tions of  the  scheme.  From  a  legal  point  of  view,  it  is  not, 
however,  of  adequate  moment,  to  base  a  classification,  for  the 
purpose  of  separate  consideration.  As  a  general  rule,  it  may 
be  laid  down,  that  the  mere  fact,  that  a  member  of  a  building 
association,  who  has  been  or  is  an  investor,  becomes  a  bor- 
rower, does  not  change  his  status  as  a  member,  or  affect  his 
rights  and  liabilities  as  such.  Whatever  exceptions  there 
may  be  to  this  rule,  and  its  consequences,  will  be  sufficiently 
noticed  hereafter. 

1  McLaughlin  et  al.  t>.  The  Citizens'  Building,  Loan,  and  Savings  Asso- 
ciation, 62  Ind.  264. 


§  70.  J          MEMBERSHIP   IX    BUILDING    ASSOCIATIONS.  129 

Persons  Capable  of  Acquiring  Membership. 

§  69.  Generally  speaking,  any  individual  capable  of  enter- 
ing into  a  binding  contract  may  become  a  member  of  a  build- 
ing association  by  subscribing  to  its  stock,1  whilst,  in  some 
instances,  the  policy  of  the  government  has  granted  an  exten- 
sion of  this  capability,  by  special  enactment,  in  favor  of  such 
institutions.  Thus,  in  England,  the  fact  of  infancy,  and  in 
some  States,  that  of  coverture,  is  no  bar  to  valid  membership 
under  the  statutes. 

Powers  of  Infants  and  Married  Women  under  Enabling  Statutes. 

§  70.  It  must  be  observed,  however,  with  reference  tct 
these  exceptional  cases,  that,  as  they  depend  entirely  upon 
statute,  and  are  in  opposition  to  the  common  law,  they  are  to 
be  strictly  construed,  and  are  allowable  only  in  such  building 
associations  as  exist  under  the  laws  contemplated  to  govern 
them,  and  under  the  statutes  of  incorporation  provided  for 
them.  And  where  the  statute  does  permit  such  membership, 
the  license,  without  further  authorization,  extends  only  to 
allowing  the  enabled  individual,  or  class  of  individuals,  to 
become  investing  or  depositing  members  of  a  society,  and,  as 
such,  subject  to  its  rules,  and  entitled  to  exercise  the  rights  of 
membership ;  to  withdraw  the  whole  or  any  part  of  the  in- 
vestment, if  and  when  the  rules  of  the  society  and  the  statutes- 
governing  them  permit  members  to  do  so ;  and  to  give  a 
valid  and  effectual  discharge  to  the  society  for  any  sum  so 
withdrawn.  It  does  not  extend,  without  express  provision  to 
that  effect,  to  an  authority  to  borrow  money,  execute  a  valid 
security,  or  enter  into  any  other  contract  with  the  association 
from  which  the  subsisting  inability,  under  the  law,  of  the  indi- 
vidual's condition,  would,  in  the  ordinary  relations  of  life, 
debar  him.8 

1  Davis,  Law  of  Building,  etc.,  the  money  loaned,  or  that  he  was 

Societies,  p.  144.  capable  of  perpetrating  a  gross  fraud 

4  Davis,  Law  of  Building,  etc.,  upon  the  association,  and  it  being 

Societies,  p.  144. — In  Maryland,  the  uncertain  whether  or  not  the  mort- 

sale  upon  an  infant's  mortgage  to  a  gage  was  for  his  benefit.  SeeMonu- 

building  association  was  set  aside,  mental  Building  Association  No.  2, 

where  there  was  no  evidence  that  of  Baltimore  City  c.  Herman  et  aL. 

the  infant  had  received  any  part  of  33  Md.  128. 


130  THE  LAW  OF  BUILDING   ASSOCIATIONS.          [CH.  V. 

§  71.  But  where  the  husband  was  the  owner  of  sixteen 
shares  in  a  building  association,  and  nine  shares  stood  in  his 
name  as  "  trustee  of  Maria  T.  Steele,"  who  was  his  wife ;  and 
money  was  borrowed  from  the  association  by  the  husband  f->r 
his  own  benefit ;  the  mortgage,  being  upon  the  wife's  prop- 
erty, but  duly  executed  by  husband  and  wife  together,  and 
reciting  that  the  twenty-five  shares  of  stock  were  the  hus- 
band's and  had  been  transferred  to  the  association  as  collateral, 
secured  "  the  monthly  contributions  on  twenty-five  shares  of 
the  capital  stock  .  .  .  now  owned  by  the  said  Thomas  R. 
Steele."  There  appeared  to  have  been  no  actual  transfer  on 
the  books  from  T.  R.  S.,  as  trustee,  to  T.  R.  S.,  individually, 
and  then  again  from  him  to  the  building  association  as  collat- 
eral security  for  the  loan.  Yet  it  was  held  that  the  associa- 
tion had  the  right  to  infer,  either  that  the  shares  always  were 
the  property  of  T.  R.  S.,  or  that  they  were  the  property  of 
the  wife,  and  that  she  had  made  a  parol  assignment  or  gift  to 
him,  or  had  allowed  him  to  pledge  them  to  secure  the  loan, 
and  that,  the  mortgage  being  properly  executed  and  valid 
under  the  laws  of  the  State,  she  was  estopped  from  denying 
this,  and  bound  by  her  declarations  in  the  mortgage.1 

Status  of  Husband  of  Feme  Sole  Member  at  Common  Law. 

§  72.  At  common  law,  if  a  female  who  is  an  investing 
member  marry,  then,  in  the  absence  of  a  settlement,  the  hus- 
band will  be  entitled  during  the  coverture  to  receive  the 
money  deposited  by  her  dum  sola  /  but  if  he  die  without  hav- 
ing received  it,  his  wife  will  be  again  entitled  to  the  money, 
and  his  personal  representatives  will  have  no  claim."  And  if 
a  woman,  dum  sola,  become  a  member  of  a  building  associa> 
tion,  and  receive  an  advantage,  in  return  for  which  she  mort> 
gages  the  property  she  holds  in  her  own  right,  covenanting 
in  the  mortgage  deed  for  payment  of  subscriptions,  fines,  etc., 
and  afterwards  marry,  she  and  her  husband  will  be  jointly 
liable  during  the  coverture  upon  the  covenant.  But  the  hus- 

1  (Building)  Association  «.  Steele,  ment  of  premiums,  fines,  etc.     See 

11  W.  K  C.  (Pa.)  204;  although  the  post,  §§  313-318. 

law  in  Pennsylvania,  as  interpreted  *  Co.    Litt.    351   a;    Richards  v. 

before  the  passage  of  the  Act  of  Richards,  2  B.  &  Ad.  447  (453);  1» 

1M79,  was  that  a  married  woman  Engl.  C.  L.  Rep.  119. 
could  not  bind  herself  to  the  pay- 


§  73.]         MEMBERSHIP   IN   BUILDING   ASSOCIATIONS.  131 

band  will  not  remain  liable  after  the  death  of  his  wife,  unless 
he  administer  to  her  estate,  and  if  she  survive  her  husband, 
she  will  again  become  solely  liable.1  Whether  the  husband 
of  a  female  member  becomes,  immediately  upon  marriage,  a 
member  of  the  association,  by  virtue  of  the  common  law,  or 
only  after  he  has  caused  the  investment  to  be  transferred 
into  his  own  name  (and  that  would  appear  a  sufficient  asser- 
tion of  ownership  to  make  the  shares  his),  or  otherwise 
reduced  it  into  possession,  is  said  by  an  English  writer  to  be 
a  question  of  some  difficulty,  and  appears  unsettled.4 

Status  of  Executor  and  Administrator  of  Deceased  Member. 

§  73.  An  executor  of  a  deceased  member  is  not,  ipso  facto, 
a  member  of  the  association.*  If  he  be  enabled  to  continue 
his  testator's  contributions,  he  must,  it  seems,  also  be  allowed 
to  exercise  his  rights  and  be  bound  by  the  rules  of  the  asso- 
ciation. But  membership  in  a  building  association  is  so 
much  in  the  nature  of  a  venture,  involving  so  varied  a  class 
of  engagements  on  the  part  of  the  person  embarking  upon  it, 
and  carrying  with  it  so  large  an  element  of  risk,  that  it  would 
seem  scarcely  compatible  with  the  policy  of  our  law  in  re- 
stricting an  executor's  discretion,  and  impressing  upon  him 
the  character  of  a  trustee  bound  to  great  care  in  the  adminis- 

1  See  Davis,  Law  of  Building,  lar  rule  being  in  force,  certain  fines 
€tc.,  Societies,  147  and  note  (».)  and  subscriptions  became  due  after 
9  Ibid.  the  death  of  a  member,  and  the  trus- 
8  Such  is  probably  the  conclusion  tees  sued  his  administrator  in  the 
to  be  drawn  from  the  only  two  cases  County  Court.  It  was  held,  under 
which  bear  upon  this  question,  and  the  evidence,  that  the  administrator 
which  both  arose  in  England;  and  was  a  member,  and  had  been  treated 
these  are  seemingly  conflicting.  In  as  such  by  the  society,  and,  accord- 
the  earlier  case,  it  was  held,  that,  un-  ingly,  a  prohibition  went  to  the 
der  a  rule  that  ' '  every  matter  in  County  Court  to  restrain  proceed- 
dispute  between  this  institution  and  ings,  in  order  to  arrive  at  a  settle- 
any  member  thereof,  or  person  ment  by  arbitration.  Knox  v.  Shep- 
claimin<r  on  account  of  such  mem-  herd,  2  L.  T.  Rep.,  N.  S  851.  This 
ber,  shall  be  referred  to  arbitrators,"  case  scarcely  can  be  held  to  establish 
the  administrator  of  an  investing  any  doctrine,  as  it  is  strictly  tut 
member  was  not  bound  by  that  rule,  generis,  and  the  duty  to  submit  to 
as  not  being  a  member,  nor  a  person  arbitration  is  forced  upon  the  so- 
claiming  on  account  of  a  member,  ciety,  upon  the  ground  of  its  es- 
Kelsall  v.  Tyler.  25  L.  J.,  Ex.  153;  toppel  to  deny  the  membership  of 
20  J.  P.  150;  11  Exch.  513:  26  L.  T.  the  administrator  whom  it  had  pre- 
Rep.  226.  In  the  later  case,  a  simi-  viously  treated  as  a  member. 


132  THE  LAW  OP  BUILDING  ASSOCIATIONS.          [CII.  V. 

tration  and  investment  of  his  trust,  and  to  abstain  from  all 
acts  and  relations,  in  his  fiduciary  capacity,  imperilling,  even 
to  a  comparatively  slight  degree,  the  integrity  of  the  fund  in 
his  hands ;  tliat  the  Court  having  supervision  over  him  would 
scarcely  be  justified  in  countenancing  the  possibility  of  his- 
being  regarded  as  a  member  of  the  association,  and  the  policy 
by  which  the  courts  are  governed,  in  this  country,  would 
seem  to  forbid  a  doctrine  by  which  the  executor  would  stand,. 
ipso  facto,  in  the  shoes  of  the  decedent,  as  to  all  the  rights- 
and  liabilities  of  membership  in  buiMing  associations.  The 
constitution  of  most  societies  of  this  kind,  and  many  of  the 
building  association  statutes,  contain  adequate  provisions  for 
the  contingency.  On  the  other  hand,  to  this  extent  an  exec- 
utor's  authority  would  unquestionably  go :  he  would  be  entitled 
to  all  the  advantages  the  decedent  would  have  had  upon  volun- 
tary withdrawal,  or  upon  repayment  by  him,  in  advance  of 
the  stipulated  time,  of  the  money  loaned  him  by  the  building 
association.1 

§  74.  If  the  decedent  have  been  an  investor,  his  executor 
is  bound  to  observe  the  society's  rules  as  to  notice  of  the 
withdrawal  of  funds.  If  he  have  been  a  borrower  from,  and 
died  a  debtor  to,  the  association,  his  executor  is  undoubtedly 
bound  to  comply  with  the  requirements  of  his  obligation  a» 
to  payments,  etc.,  subject  to  the  right  of  payment  of  the 
whole  debt  before  its  maturity,  if  such  existed  in  the  dece- 
dent. But,  even  in  the  absence  of  legal  provision  upon  the 
subject,  the  building  association  should  not  be  allowed  to 
impose  any  fines  and  forfeitures,  without  giving  the  executor 
at  least  a  reasonable  time  to  acquaint  himself  with  his  dece- 
dent's estate,  and  get  funds  into  his  hands  wherewith  to  make 
the  required  payments.  The  general  spirit  of  the  courts  is, 
to  deal  most  gently  with  those  who  represent  the  inter- 

1  Thus,  too,  in  Pennsylvania,  dent)  had  elected  to  repay  the  loan 
when  a  building  association  mort-  and  withdraw,  there  being  no  de- 
gage  was  divested,  by  an  Orphan's  fault  on  his  part.  The  mortgage  i» 
Court  sale  of  the  mortgagor's  prem-  divested  under  the  policy  of  the  law, 
ises  for  the  payment  of  his  debts,  it  and  the  money  repaid  under  its  corn- 
was  held  that  the  building  associa-  pulsion.  Acfris  teffts  neminem  in- 
tion  could  claim  only  the  same  jnriat.  In  re  Snider's  Estate,  34 
amount  as  if  the  borrower  (dece-  Leg.  Int.  (Pa.)  49. 


§  76. J         MEMBERSHIP  IN   BUILDING   ASSOCIATIONS.  !'•'>•> 

•ests  of  decedents,  as  against  those  who  have  claims  against 
the  latter.1 

Building  Association  Cannot,  of  course,  Become  a  Member  in  Another 
Building  Association. 

§  75.  Except  by  special  statute  authority,  it  would  appear 
that  one  building  association  cannot  lawfully  become  a  mem- 
ber or  shareholder  in  another.  This  seems  to  flow  from  the 
design  of  the  creation  of  building  associations,  to  utilize  the 
money  collected  in  small  sums,  so  as  to  do  most  benefit  to  its 
own  members,  and  such  members,  in  particular,  who  desire  to 
build  or  possess  houses.  This  is  their  public  duty,  and  the 
source  of  their  privileges."  And  a  person,  whether  natural 
or  artificial,  to  whom  privileges  are  granted  by  the  Legislature, 
is  bound,  upon  accepting  the  same,  to  render  to  the  public 
that  service,  the  performance  of  which  was  the  inducement 
to  the  grant.  It  is  because  of  such  obligation  to  render  service 
to  the  public,  that  the  Legislature  has  power  to  make  the 
grant ;  and  whatever  act,  on  the  part  of  the  grantee,  tends  to 
defeat  the  accomplishment  of  the  object  contemplated  in 
making  it,  is  necessarily  unlawful.3 

A  Person  may  Become  Member  Merely  to  Obtain  a  Loan. 

§  76.  A  person  may,  legitimately,  become  a  member  for 
the  mere  purpose  of  obtaining  a  loan.  He  has  a  perfect  right 

1  In  the  case  of  a  beneficial  socie-  ficial  Society,  11  N.  Y.  Weekly  Dig. 

ty,  where  the  charter  provided  that  457. 

the  secretary  should  send  to  each  *  See  North  America  Building 
member  six  months  in  arrears,  notice  Association  «.  Sutton,  35  Pa.  St.  463 
that  he  would  be  stricken  off  the  (opinion  by  Strong,  J.,  p.  467). 
roll  unless  he  paid  up  in  thirty  days;  3  Gordon,  etc.,  «.  Winchester 
and  a  penalty  was  also  provided,  in  Building  and  Accumulation  Fund 
case  of  an  omission  to  give  notice  of  Association,  12  Bush  (Ky.),  110. 
every  change  of  residence;  and  the  See  also  Mills  et  al.  ».  Salisbury 
decedent,  besides  having  failed  to  Building  and  Loan  Association,  75 
notify  the  association  of  a  change  N.  C.  292;  Latham  and  wife  r. 
in  his  residence,  had  actually  died  Washington  Building  and  Loan  As- 
far  in  arrears;  it  was  held  that  the  sociation,  77  N.  C.  145;  Martin  c. 
omission  to  have  the  required  notice  Nashville  Building  Association  et 
served  was  not  excused,  and  that  al.,  2  Cold.  (Tenn.)  418;  The  Me 
the  society  could  not  exercise  the  chanics  and  Working  Men's  Mutual 
power  of  expulsion  without  notice  Savings  Bank  and  Building  Assoc.  of 
to  the  deceased.  Wachtel  v.  The  New  Haven  v.  Meriden  Agency  Co. , 
Noah  Widows'  and  Orphans'  Bene-  24 Conn.  159;  Samep.Wilcox,Ib.l47. 


134  THE  LAW  OF  BUILDING  ASSOCIATIONS.  [CH.  V. 

to  become  a  stockholder,  and  if,  in  consequence,  he  is  enabled 
to  obtain  a  loan,  the  fact  that  this  was  his  purpose  in  enrolling 
himself  in  the  building  association,  constitutes  no  objection 
to  his  exercising  any  and  all  of  the  privileges  conceded  and 
appertaining  to  membership  therein.'  Nor  does  the  fact  that, 
by  reason  of  an  excessive  assumption  of  authority  on  the  part 
of  the  building  association,  indictating  the  terms  of  the  loan 
made  to  such  member,  he  escapes  the  full  extent  of  the  obliga- 
tion he  has  been  saddled  with,  affect  his  rights  or  liabilities  as 
a  stockholder.* 

Depositors. 

§  77.  There  is,  where  it  is  permitted  by  law  to  exist,  a 
class,  known  as  "  depositors," — persons  who,  without  entering 
the  circle  of  the  society's  membership,  and  becoming  liable  to 
all  its  duties,  and  sharing  in  all  its  benefits,  use  its  treasury  as 
a  savings  bank,  in  which  to  deposit,  from  time  to  time,  small 
sums  of  money,  with  the  privilege  of  drawing  them,  at  their 
pleasure,  thereafter,  under  certain  restrictions,  and  with  the 
addition  of  interest  at  a  certain  moderate  rate.'  These  people 
are  not  members.  Their  status  depends  entirely  upon  statu- 
tory provisions ;  for,  without  such,  the  society  has  no  right  to 
take  their  money,  and  the  safety  of  their  own  deposits  is  ma- 
terially imperilled.4  Thus,  where  depositors  had  given  their 
money  to  a  building  association  having  no  power  to  borrow, 
the  depositors  were  subsequently  held  bound  by  the  rules  of 
the  association  by  which  the  advanced  shareholders,  who  had 
repaid  their  loans  and  extinguished  their  stock,  were  dis- 
charged from  all  connection  with  the  society,  and  could  not, 
consequently,  be  called  upon  for  contribution  towards  the  pay- 
ment of  the  society's  debts,  which  consisted  largely  in  balances 
due  these  depositors.' 

1   The  Mechanics  and  Working  hinted  at,  without  being  expressly 

Men's  Mutual  Savings  Bank  and  decided,  in  Ohio  (Forrest  City  Uni- 

Building  Association  of  New  Haven  ted  Land  and  Building  Association 

t>.  Wilcox  et  al.,  24  Conn.  147.  t>.  Gallagher  et  al.,  25  Ohio  St.  208), 

*  Ib.  to  wit,  that  it  is  illegal,  under  the 

3  This  feature  is  a  popular  one  in  Constitution  of  the  State,  as  a  spe- 

Germany  and  England,  but  has  not  cies  of  banking. 

gained  much  ground  in  this  coun-  4  It  involves  the  power  of  borrow- 

try;    probably    because,    in    most  ing,  asto  which, see  post,  §§293-302. 

States,  the  reason  obtains  which  is  *  This  ground  was  taken  in  ad- 


§  79.]         MEMBERSHIP  IN   BUILDING   ASSOCIATIONS.  135 

Stock-book  Primary  Evidence  of  Membership. 

§  78.  In  all  dealings  of  the  building  association  with  its 
members,  not  in  especial  contract  relations ;  in  stock  payments, 
exercise  of  the  elective  franchise,  participation  in  dividends 
upon  winding  up,  etc.,  the  stock-book  is  prima  facie  evidence 
of  membership.'  The  corporation  is  not  required  to  look 
beyond  it,  without  having  been  affected  by  circumstances  cal- 
culated to  put  it  upon  its  guard.  As  between  two  claimants 
of  the  stock,  the  question  is  one  of  absolute  fact :  Which  is- 
actually  the  holder  of  the  shares  ?  Possession  of  the  certifi- 
cates, with  the  transfer  endorsed  upon  them,  is  frequently, 
in  such  cases,  the  decisive  criterion.  But,  as  between  the 
claimant  and  the  building  association,  it  is  the  business  of  any 
one,  desiring  the  benefits  of  membership  in  it,  to  bring  him- 
self to  its  notice,  to  acquire  his  proper  standing  and  recogni- 
tion as  a  member,  by  procuring  the  stock  he  holds  to  be 
placed  in  his  name  upon  the  corporation's  books.  The  society 
need  not  beat  about  for  its  members  whenever  it  is  ready  to 
dispense  some  one  of  its  corporate  benefits  to  such  as  may  be 
entitled  to  them.  One  who  wishes  to  come  in  for  a  share, 
must  put  himself  in  a  position  to  be  remembered  by  the  offi- 
•  cers  of  the  building  association,  when  they  consult  the  corpo- 
ration book  to  ascertain  who  are  the  members,  by  attending 
to  it  that  his  name  shall  be  found  in  its  proper  place.  If  he 
be  legally  entitled  to  hold  the  stock,  he  may,  in  a  proper  case, 
enforce  its  transfer  to  his  name  on  the  books,  or  else  have 
his  action  for  damages  against  the  society,  for  their  refusal  to 
permit  such  transfer  when  properly  requested." 

Society  Estopped  from  Denying  a  Person's  Membership. 

§  79.  The  building  association  may,  indeed,  put  itself  in 
a  position  where  it  will  be  estopped  from  denying  a  person's 
membership.  So,  where  it  continues  to  receive  stock-pay  - 

dition  to,  and  distinct  from  that  of  Ch.  Rep.  406;  Bank  of  Commerce's 

ultra  vires.     In  re  Victoria  Perma-  Appeal,    73   Pa.   St.  59;    German, 

nent  Benefit  Building  Society,  Hill's  town  Union  Building  and  Savings 

Case,  Jones's  Case,  9  L.  R.,  Eq.  605;  Fund  Association  v.  Sendrnayer,  50 

39  L.  J.,  Ch.  628;  18  W.  R.  967;  22  Pa.  St.  67;  and  see  post.,  §§  445- 

L.  T.,  N.  S.  777.  446. 

1   Dobinson  v.   Hawks,   16  Sim.  *  As  to  all  matters  relating  to 

407;  12  L.  T.  Rep.  238;  39  Engl.  stock,  see  post,  Ch.  xvii. 


136  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.  V. 

ments  from  one  upon  whose  mortgage  it  lias  sued  and  issued 
execution  to  collect,  making  the  whole  amount  out  of  the 
mortgaged  premises,  it  will  not  subsequently  be  permitted  to 
deny  his  subsisting  membership.'  The  continued  acceptance 
of  his  dues  as  a  member  indicates  that  there  has  been  no  for- 
feiture enforced,  but  that,  if  the  right  to  put  it  in  operation 
was  perfected  at  any  time,  it  was  waived.  The  same  fact  pre- 
cludes the  theory  of  an  appropriation  of  the  stock  to  the 
mortgage  debt,  either  by  the  member  or  by  the  association. 
And,  having  led  him  into  payments,  under  this  assumption,  of 
which  the  association  received  the  benefit,  it  cannot  afterwards 
set  up  any  such  forfeiture  or  appropriation  against  the  mem- 
ber claiming  as  such  against  the  corporation. 

§  80.  But  this  acceptance  of  payments  must  be  clearly  the 
act  of  the  association,  or  such  portion  of  it  as  can  bind  the 
whole.  Hence,  when  stock  payments  were  received  by  only 
two  of  twelve  directors,  from  one  whose  shares,  under  the 
rules,  were  forfeited,  and  this  acceptance  was,  at  the  first  sub- 
sequent board  meeting,  promptly  disavowed,  and  the  money 
returned,  no  claim  of  membership  could,  upon  the  ground  of 
the  acceptance  of  said  payment,  avoid  the  forfeiture.8  Only 
a  majority  of  the  directors  could  make  a  contract  binding 
upon  the  building  association.  A  lesser  number  could  not 
assume  to  do  so.  Their  act  might  be  ratified  by  the  major- 
ity ;  but  it  might  equally  be  repudiated,  if  no  •  such  time 
was  suffered  to  elapse,  or  circumstances  to  arise,  as  could  give 
the  other  party  equities  enough  to  enforce  it,  in  spite  of  its  de- 
fect as  to  consent  on  the  part  of  the  building  association. 

Borrower  Estopped  from  Denying  His  Membership.     Exception. 

§  81.  Conversely  a  borrower  may  become  estopped  from 
denying  that  he  is  a  member  of  a  certain  building  association. 
Thus,  where  the  signing  of  the  by-laws  was  made,  by  the 
charter,  a  requirement  in  order  to  membership,  and  the  law  of 
the  State  prohibited  building  associations  from  loaning  money 
to  any  but  members ;  the  execution  of  a  bond  necessarily  im- 
plying or  purporting  to  be  that  of  a  member,  by  a  person  who 

1  North   America    Building  As-     Engl.  C.  L.  R.  197;  26  L.  J.,  0    P 
sociation  t.  Button,  35  Pa.  St.  463.        113 
*  Card  T>.  Carr,  1  C.  B.,  N.  S.  (87 


§  82.]         MEMBERSHIP   IN    BUILDING    ASSOCIATIONS.  13? 

had  received  a  loan  from  the  society,  without  ever  having 
signed  the  by-laws,  was  held  to  be  a  sufficient  assent  to  them, 
on  the  part  of  such  person,  and  he  was  not  subsequently 
permitted  to  deny  that  he  was  a  member,  for  the  purpose  of 
showing  that  the  loan  by  the  association  was  ultra  vires,  and 
could  not  be  enforced  against  him.1  Yet,  where  the  ac- 
knowledgment, or  matter  relied  upon  to  estop  a  person  from 
denying  relations  to  the  building  association,  which  are 
sought  to  be  made  the  ground  of  claim  against  him,  has  arisen 
from  demonstrable  error  or  accident,  and  the  actual  state  of 
facts  is  clearly  shown  to  contradict  the  assumption,  the  estop- 
pel will  not  take  place.  A  person,  not  being  a  member,  pur- 
chased land  from  a  building  association,  and  mortgaged  it  to 
the  same,  to  secure  the  purchase  money.  The  mortgage, 
which  was  a  filled-up  printed  form,  prepared  by  the  society's 
solicitor,  recited  that  the  mortgagor  was  the  holder  of  eleven 
shares.  In  point  of  fact,  he  had  never  applied  for  any  shares, 
never  held  any,  never  been  treated  by  the  society  as  a  share- 
holder. He  did  not  read  over  the  mortgage,  nor  were  its 
contents  explained  to  him  prior  to  execution.  The  building 
association  having  been  ordered  to  be  wound  up,  he  was 
placed  on  the  list  of  contributories.  But  it  wras  held,  that,  as 
the  recital  was  incorrect,  and  as  he  was  ignorant  of  its  exist- 
ence at  the  time  he  executed  the  mortgage,  he  was  not  liable 
as  a  contributory.8 

Termination  of  Membership. 

§  82.  The  relation  of  membership  in  a  building  associa- 
tion, with  all  its  attendant  rights  and  liabilities,  is  terminated  : 
(1)  by  the  death  of  the  member;  (2)  by  transfer  of  the  shares 

1  Howard  Mutual  Loan  and  Fund  provision  of  the  statute  which  in- 

Association    v.  Mclntire,   3    Allen  hibits  loans  to  non-members,  the  de- 

(Mass.),  571.     It  is  proper  to  add,  fendant  might,  probably,  show  such 

that  the  borrower,  in  this  case,  re-  fraud  in  his  defence, 

lied  entirely  upon  the  fact  of  his  not  s  Victoria     Permanent     Benefit 

having  signed  the  by-laws,  and  pro-  Building  Investment  and  Freehold 

duced  no  other  ground  for  his  alle-  Land  Society  of  Birmingham  and 

gation  that  he  was  not  a  member;  the    Midland    Counties,     Epsom's 

and  that  the  Court  intimates,  that, .  Case,  22  L.  T.,  N.  S.  855;  18  W.  R 

if  the  bond  had  been  given  with  a  565;  9  L.  R.,  Eq.  597. 
view  to  a  fraudulent  evasion  of  the 


138  THE  LAW  OP  BUILDING  ASSOCIATIONS.        [CH.  VI. 

held  by  him  to  another  party  stepping  into  his  shoes  ;  (3)  by 
voluntary  withdrawal  in  accordance  with  the  provisions  of 
the  statute,  charter,  and  by-laws  governing  the  association,  or 
in  pursuance  of  some  special  arrangement  or  composition,  or 
by  application  of  the  value  of  his  shares  to  his  debt,  if  he  be 
a  borrower ;  (4)  by  forfeiture  of  membership,  in  the  manner 
and  for  the  causes  set  forth  in  the  rules  of  the  society ;  (5) 
by  the  dissolution,  or  what  amounts  to  dissolution,  of  the  so- 
ciety, and  by  the  expiration  of  the  series  in  which  the  mem- 
ber's stock  stood  ;  (6)  in  case  the  member  has  become  a  bor- 
rower, by  the  terms  of  his  contract  with  the  association,  if 
they  warrant  and  contemplate  such  a  conclusion. 

All  these  points,  so  far  as  they  require  elucidation,  will 
receive  it  under  the  proper  heads.1 


CHAPTER  VI. 

DUTIES  OF  MEMBERS. 

§  83.  Obedience  to  rules  and  assent  to  lawful  corporate  acts. 

§  84.  Duties  of  members  as  to  stock-payments. 

§  85.  No  absolute  liability  for  stock-payments  until  the  whole  capital 
subscribed.     Exception. 

§  86.  Society  may  maintain  assumpsit  for  dues,  without  notice. 

|  87.  Statutory  lien  on  stock  for  arrears,  etc. 

§  88.  Borrower's  liability  upon  his  obligation  after  repayment  of  loan. 

§  91.  Liability  for  dues,  etc.,  not  suspended  by  entry  of  suit. 

§  92.  Liability  to  fines  imposed  on  default. 

§  93.  Necessity  and  legal  aspect  of  fines  in  building  associations. 

§  96.  Rules  to  be  observed  in  relation  to  fines. 

1 99.  Forfeitures. 

§  103.  Duty  of  members  to  render  personal  services. 
§  104.  Duty  of  members  to  contribute  pro  rata  to  losses  and  expenses  of 

society. 

§  105.  Members  cannot  withdraw  to  evade  liability  to  contribute. 
§  106.  Liability  to  contribute  not  affected  by  taking  loan. 
§  108.  Termination  of  liability  to  contribute. 
§  110.  Personal  liability  of  stockholders  for  debts  of  society. 
§  111.  Corporate  property  may  be  followed  into  hands  of  stockholders, 

«  See  post,  §§  99,  108,  127,  seqq.,  146-148,  495,  etc. 


§  85.]  DUTIES   OF   MEMBERS.  139 

Obedience  to  Rules  and  Assent  to  Lawful  Corporate  Acts. 

§  83.  The  relation  of  membership  in  a  building  associa- 
tion involves  certain  reciprocal  rights  and  obligations,  as 
between  the  individual  and  the  society.  The  person  entering 
its  circle  is,  in  many  cases,  required  to  subscribe  to  the  consti- 
tution and  by-laws,  in  token  of  his  submission  to  their  re- 
quirements. But,  independently  of  such  formality,  the  law 
imposes  upon  him,  as  a  duty  springing  from  an  implied  but 
binding  contract,  obedience  to  the  rules  of  the  association ; 
not  only  to  such  as  exist  at  the  time  of  his  reception  into  it, 
but  also  to  all  such  other  rules,  by-laws,  and  orders  as  may, 
at  any  future  time,  be  lawfully  established.  As  to  such  regu- 
lations, as  well  as  all  lawful  acts  of  the  society,  the  law  pre- 
sumes the  assent  of  every  individual  member.1  Every  member 
also  owes  the  society  his  personal  services. 

Duty  of  Members  as  to  Stock  Payments. 

§  84.  The  whole  prosperity  of  the  enterprise  involved  in 
the  building  association  scheme,  depends  upon  the  prompt 
fulfillment  of  the  members'  undertakings  with  regard  to  stock- 
payments.  This  undertaking  is  absolute  in  its  obligation 
upon  the  member,  and  ceases  only  with  his  cessation  from 
membership,  or  the  determination  of  the  society.  Nothing 
short  of  fraud  or  misrepresentation,  on  the  part  of  the  associa- 
tion, can  relieve  him  of  the  binding  force  of  his  undertaking. 
The  misbehavior  of  other  members,  their  refusal  to  live  up 
to  their  engagements,  their  persistent  and  deliberate  default 
in  the  payment  of  dues,  will  not  excuse  similar  action  on  the 
part  of  any  particular  one,  nor  relieve  him  of  his  liability  to 
the  association  for  his  stipulated  stock-payments.* 

No   Absolute  Liability  for  Stock-Payments  until  the  Whole  Capital 
Subscribed.     Exception. 

§  85.  This  absolute  liability,  however,  does  not  occur 
until,  where  the  amount  of  the  capital  stock  is  fixed,  and  the 

1  Angell  and  Ames,  Corp.,  §  499;  dissolution,  practically,  the  liability 

Field,  Corp.,  §  226.  of  borrowing  members  may  become 

9  See  Hoboken  Building  Associa-  materially  affected.     See  post,   g§ 

tion  v.  Martin,  2  Beas.  (N.  J.)  428.  496-503. 
Where  the  defection  amounts  to  a 


140  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  VI. 

i!  ii i nber  of  shares  ascertained  by  the  charter,  the  whole  capital 
stock  has  been  taken.1  It  is  to  be  presumed  that  the  entire 
amount  fixed  is  necessary  for  the  successful  prosecution  of 
the  business  for  which  the  association  is  incorporated,  and  the 
subscriptions  are  made  upon  this  implied  understanding, 
being  considered,  to  that  extent,  as  conditional.  Yet  it  is  a 
condition  which  the  subscribers  may  waive,  and,  with  their 
consent,  the  company  may  not  only  organize,  but  do  all  other 
thi  >gs  incident  to,  and  necessary  for,  the  particular  business 
for  which  it  was  formed.  And  this  waiver  may  be  either 
express,  or  implied  from  the  acts  and  declarations  of  the 
members.  If,  knowing  the  whole  capital  stock  has  not  been 
taken,  they  attend  the  meetings  of  the  company,  co-operate 
in  the  votes  for  expenditure  of  money,  for  the  purchase  of 
property,  for  the  making  of  contracts,  and  other  acts  which 
could  only  properly  be  done  upon  the  assumption  that  the 
subscribers  intended  to  proceed  with  the  stock  taken  up,  they 
will  become  affected  with  all  the  liabilities  of  membership, 
and  estopped  from  setting  up  the  irregularity  as  against  their 
enforcement.*  This  rule  can  only  protect  and  relieve  from 
the  duty  of  payment  subscribers  who,  in  good  faith,  objected 
to  the  organization  of  the  company,  when  all  its  capital  stock, 
which  was  necessary  to  the  enterprise,  had  not,  in  fact,  been 
taken ;  but  it  was  never  intended,  and  courts  will  not  permit 
it,  to  be  used  as  an  instrument  of  fraud,  but  will  enforce 
upon  such  members,  as  consented  to  going  on  with  the  incom- 
plete subscriptions,  all  the  duties  and  liabilities  of  member- 
ship in  a  properly  organized  association. 

Society  may  Maintain  Assumpsit  for  Dues,  without  Notice. 

§  86.  The  association  may  maintain  an  action  of  assumpsit 
against  a  member  for  his  dues.*     Nor  is  it  necessary,  in  order 

1  Morrison,  etal., Receivers Chesa-  R.  Co.,  78  Pa.  St.  465.     The  recog- 

peake  Mutual  Land  and  Building  nition  of  the  society's  proper  exist 

Association,  v.  Dorsey,  48  Md.  461.  ence  by  a  person,  giving  it  his  note, 

*  See  case  in  preceding  note,  and  etc.,  in  its  corporate  name,  is  also  a 

Hager  ».  Cleveland  and  Bassett,  36  waiver  of  the  above  defect.    Massey 

Md.  476  (491);  cit.  Cabot  and  West  v.  The  Citizens'  Building  and  Sav- 

Springfield  Bridge  Co.  v.  Chapin  et  ings  Association  of  Paola,  22  Kas. 

al.,  6  Gush.  (Mass.)  50.  373;  Garrett  624. 
c.  Dillsburg  and  Mechanicsburg  R.         *  Building  Association    v.  Kribs, 


§  88.]  DUTIES   OF    MEMBERS.  141 

to  perfect  this  right,  that  the  society  give  notice  to  the  delin- 
quent member  of  the  fact  that  hie  payment  is  due,  unless 
such  notice  be  required  by  the  rules.1  A  statutory  direction 
to  corporations  generally,  to  give  notice  to  members  of 
calls  upon  subscriptions,  does  not  apply  to  a  corporation, 
under  the  by-laws  of  which  the  subscribers  to  its  stock  are 
under  a  continuing  requirement  to  pay  a  periodical  instal- 
ment of  a  fixed  amount  on  each  share.  Hence  it  has  no 
application  to  a  building  association.* 

Statutory  Lien  on  Stock  for  Arrears,  etc. 

§  87.  The  statutes  of  the  various  States  regulating  build- 
ing associations,  generally  give  them  a  lien  upon  the  default- 
ing member's  shares  for  the  amount  of  the  unpaid  instalments 
and  other  charges  and  liabilities  of  membership.  A  member 
who  is  in  arrears,  therefore,  has  no  right  to  withdraw  *  from 
the  society,  nor  can  he  properly  and  freely  transfer  his  shares 
until  he  has  become  "  clear  of  the  books."  Such  right  of  lien, 
however,  rests  upon  statute,  and  not  upon  common  law.4 

Borrower's  Liability  upon  His  Obligation,  after  Repayment  of  Loan. 
§  88.  If  the  member  be  at  the  same  time  a  borrower,  his 
bond  or  mortgage,  even  after  satisfaction  or  payment  of  the 
amount  loaned,  or  stipulated  to  be  repaid,  and  interest,  re- 
mains as  a  security  for  the  faithful  performance  of  his  duties 
as  a  member,  such  being  part  of  the  condition  of  the  obliga- 
tion, and  may  be  used  to  enforce  the  further  payment  of  his 
monthly  dues  and  other  charges.5  Any  previous  liability, 

7  Leg.  and  Ins.  Rep.  (Pa.)  21;  and  ation  v.  Blackburn,  et  al.,  48  Iowa, 

see  case  in  following  note.  385,  and  see  post. 

1  Morrison,  et  al.,  Rec'rs  Cbesa-  «  Field,  Corp.,  g  310;  cit.  Union 

peake  Mutual   Land  and   Building  Bank    u.    Laird,    2    Wheat.     390; 

Association,  v.  Dorsey,  48  Md.  461.  Rogers  t>.  Huntington  Bank,  13  S. 

»  Ib.,  holding  the  Act  of  1868,  &  R.  (Pa.)  77;  Grant  v.  Mechanics' 

Ch.  471,  §  65,  inapplicable  to  build-  Bank,  15  Id.  140;  Sewall  v.  Lancas- 

ing  associations.  ter  Bank,  17  Id.  285;  Utica  Bank  v. 

3  McGrath  n.  Hamilton   Savings  Smalley.  2  Cow.  (N.  Y.)770;  Steam- 

and  Loan  Association,  44  Pa.  St.  ship  Dock  Co.  v.  Heron,  52  Pa.  St. 

883;    Watkins    v.     Workingraen's  280. 

Building  and  Loan  Association,  10  5  Everham    «.    Oriental    Saving 

W.  N.  C.  (Pa.)  414,  97  Pa.  St.  514;  and  Loan  Association,  47  Pa    St. 

Hawkeye  Bom-fit  and  Loan  Associ-  352.     This  case  arose  prior  to  1859, 


142  THE  LAW   OF  BUILDING   ASSOCIATIONS.         [CH.  Vt. 

due  or  to  become  due,  may  be  included  in  a  mortgage  given 
for  a  present  advance,  and  as  one  of  the  terms  on  which  the 
advance  is  made.  The  agreement,  then,  by  the  borrower,  to 
pay  monthly  dues,  embraces  a  previously  existing,  lawful 
debt,  and  may,  as  well  at  law  as  in  equity,  be  secured  by  a 
mortgage  given  for  a  present  advance.1  The  repayment  of 
the  sum  borrowed,  therefore,  or,  to  use  a  phrase  more  uni- 
versally applicable  to  all  kinds  of  schemes  by  which  the  loan 
of  money  in  building  associations  is  disguised — the  indemnifi- 
cation of  the  society  for  the  use  of  the  money,  according  to 
the  undertaking  of  the  mortgage,  does  not  entirely  satisfy  all 
ics  conditions.  It  remains  a  subsisting  security  in  the  hands 
of  the  association,  and  may  be  sued  upon  to  enforce  the  re- 
maining stipulations  relating  to  stock-payments,  etc. 

§  89.  In  like  manner,  where  the  amount  due  upon  a  mort- 
gage has  been  fixed,  by  a  decree  of  Court,  in  a  suit  to  fore- 
close, upon  default  in  the  payment  of  instalments,  etc.,  and 
an  order  of  sale  has  passed,  whilst  the  mortgagor,  asserting  his 
right  to  redeem  before  actual  sale,  by  paying  the  amount 
judicially  ascertained,  will  stop  the  sale  of  the  property,  the 
decree  will  stand  as  a  security  for  future  installments  and  lia- 
bilities.4 

§  90.  In  England,  the  same  principle  is  enforced  and 
strikingly  illustrated.  The  estimated  probable  duration  of  a 
building  association  was  thirteen  years.  An  advanced  mem- 
ber was  held  entitled  to  redeem  on  payment  of  his  subscrip- 
tions (the  mortgage  being  given  to  secure  such)  to  the  end  of 
the  thirteen  years,  although  he  was  still  liable  to  pay  sub- 
scriptions until  the  fixed  value  of  each  share  was  realized  for 
every  member.1  And,  in  a  similar  case,  the  same  principle 
was  re-asserted,  with  this  peculiar  feature,  that  the  borrower, 
who  was  allowed  to  redeem,  was,  notwithstanding  the  redemp- 
tion, held  liable  te  continue  his  subscriptions  beyond  the 
thirteen  years,  which  period  proved  insufficient  to  bring  the 

and  its  policy  expands  with  the  act  Ohio  St.  186;  Risk  ».  The  Delphos 

of  that  year.  Building  and  Savings  Association, 

1  Ib.  31  Ohio  St.  517. 

9  Robertson  t>.  The  American  8  Sparrow  v.  Farmer,  26  Beav. 

Homestead  Association,  10  Md.  397;  511 ;  5  Jur.,  N.  S.  530;  28  L.  J.,  Ch. 

Hagerman  et  al.  «.  The  Ohio  Build-  537;  33  L.  T.  216;  S.  P.  Handley 

ing  and  Savings  Association,  25  v.  Farmer,  29  Beav.  362. 


§  93.]  DUTIES   OF   MEMBERS.  143 

shares  up  to  the  fixed  value,  upon  reaching  which  the  society 
was  to  terminate.1  The  securities  in  these  cases  were  va- 
cated, under  the  system  in  practice  in  England ;  but  the  cov- 
enants in  the  mortgage  deeds  were  held  to  extend  to  pay- 
ments as  just  indicated,  and  might  be  sued  upon. 

Liability  for  Dues,  etc.,  not  Suspended  by  Entry  of  Suit. 

§  91.  The  bringing  of  suit  by  the  building  association 
against  a  member  does  not  relieve  the  latter  from  continuing 
his  payments,  or,  upon  neglect  to  do  so,  from  exposing  him- 
self to  the  penalties  resulting  therefrom  under  the  rules  of 
the  society.1 

Liability  to  Fines  Imposed  on  Default. 

§  92.  The  most  usual  and  effective  method,  however,  of  se- 
curing punctuality  on  the  part  of  the  members  in  the  discharge 
of  their,  for  the  purposes  of  the  association,  most  important 
duty,  the  regular  payment  of  their  subscriptions,  is  the  system 
of  fines  and  forfeitures  which  these  societies  have  adopted. 
The  authority  given  them  by  the  various  statutes  to  impose 
these  penalties,  carries  with  it  a  corresponding  liability,  on  the 
part  of  the  members,  to  submit  to  their  imposition,  from 
which  they  cannot  escape. 

Necessity  and  Legal  Aspect  of  Fines  in  Building  Associations. 

§  93.  It  is  not  quite  accurate  to  call  fines  in  building  asso- 
ciations penalties,  nor  have  the  courts,  when  called  upon  to 
enforce  them,  treated  them  as  such.  They  answer  a  purpose 
very  different  from  that  of  mere  punishment.  The  default- 
ing member's  action  is  an  injury  to  the  association,  arising  out 
of  a  breach  of  contract  attributable  to  him.  If  he  is  allowed 
to  continue  indefinitely  to  withhold  his  subscription  from  the 
common  fund,  or  even  to  withhold  it  for  a  comparatively 
short  space  of  time,  whenever  the  day  for  his  periodical  pay- 
ment comes  around,  and  it  suits  him  to  delay,  it  is  clear  that, 
on  every  such  occasion,  he  is  depriving  the  society  of  just  so 
much  money,  which  might  and  ought  to  be  invested  and 

1  Farmer  v.  Smith,  4  H.  and  N.  Association  «.   Metzgcr,  8  W.   N. 

196;  5  Jur.,  N.  8.  533,  n.;  28  L.  J.  C.  (Pa.)  204;  Union  Building  Loan 

Exch.  226.  Association  v.  Masonic  Hall  Associ- 

*  Sec  German  Fair  Hill  Building  atiou,  2  Stew.  (N.  J.)  389. 


144  THE   LAW  OF  BUILDING   ASSOCIATIONS.        [CH.  VI. 

working  for  the  common  good.  Yet,  in  the  end,  he  will 
come  in  for  his  share  of  the  profits,  not  otherwise  than  if  ho 
had  l>een  the  most  conscientious  of  members.  Thus  he  will 
be  getting  an  advantage  over  and  above  the  other  members  : 
he  will  have  had  the  use  of  his  subscription  money  for  a 
longer  period  than  the  other  members  had  theirs,1  and,  besides, 
In-  will  have  his  proportionate  share  of  the  gains  made  upon 
all  their  prompt  payments,  whilst  he  will  lose  only  the  trilling 
amount  which  would  have  come  to  him  as  his  proportion  of 
the  profits  that  would  have  been  made  upon  his  subscription 
during  the  time  intervening  between  the  day  when  it  was  his 
duty  to  pay  it,  and  that  upon  which  he  did  pay  it.  It  follows, 
that  the  society  is  entitled,  ex  cequo,  to  be  reimbursed.  Yet 
the  precise  amount  which  it  has  lost  by  the  member's  default 
is  not  to  be  got  at.  Therefore,  the  original  contract  between 
the  member  and  the  association,  foreseeing  the  possibility  of 
such  a  case,  and  providing  for  it,  stipulates  for  certain  liqui- 
dated damages,  which  are  called  fines. 

§  9±.  These  fines,  therefore,  do  not,  in  any  sense,  come 
within  the  principle  which  forbids  a  Court  of  Equity  to  lend 
itself  to  enforcing  the  payment  of  fines,  penalties,  and  for- 
feitures.4 

§  95.  So  thoroughly,  indeed,  are  fines  recognized  as  an  es- 
sential part  of  a  building  association's  machinery,  that  a  mar- 
ried woman's  mortgage  on  her  separate  property,  to  secure  a 
'  loan  which  her  husband,  as  a  stockholder,  had  procured  from 
a  building  association,  covers  fines  incurred  by  him  by  reason 
cf  his  default  in  payments  to  the  association,  their  payment 
being  an  usual  part  of  his  undertaking;3  and  that,  when  a 

1  Dues  and  fines  are  payable  in  tnulgee  Building  and  Loan  AssocLi- 
cash,  and  the  treasurer  has  no  right,  tion  «.  Thomson,  52  Ga.  427;  Par- 
even  in  the  presence  and  with  the  ker  «.  Butcher,  16  L.  J.,  Ch.  552 ;  3 
acquiescence  of  the  executive  offi-  L.  R.,  Eq.  762.  The  case  of  Mul- 
cers,  to  receive  promises  to  pay  in-  loy  r>.  Fifth  Ward  Building  Associn- 
stead  of  cash.  People's  Building  tion,  2  McArth.  (Supr.  Ct.,  D.  C.) 
and  Loan  Association  v.  Wroth,  et  594,  contra,  seems  to  have  been 
al.,  14  Vroom  (N.  J.)  70;  Mutual  dictat ed  by  the  unreasonably  oppres- 
Building  and  Loan  Association  v.  sive  character  of  the  fines,  whirh 
Hammell,  et  al.,  Ib.  78.  made  them  penalties,  indeed,  of  the 

s   Shannon  v.   The  Howard  Mu-  most  grievous  kind, 
tual  Building  Association    of    the  3  Juninta  Building  and  Loan  As- 
City  of  Baltimore,  36  >Id.  383;  Oc-  sociation  v.  Mixell.  84  Pa.  St.  313. 


§  97.]  DUTIES   OF    MEMBERS.  145 

mortgage,  given  to  a  building  association  by  one  of  its  mem- 
bers, recognizes  his  obligation  to  pay  the  fines  which  may  be 
imposed  upon  him  by  the  building  association,  and  stipulates 
for  their  payment,  it  has  been  held  that  the  court,  when  called 
upon  to  foreclose  the  mortgage,  exparte  or  otherwise,  ought 
to  allow,  in  the  ascertainment  of  the  indebtedness  of  the  mort- 
gagor, the  fines  reasonably  charged  against  him.1 

Rules  to  be  Observed  in  Relation  to  Fines. 

§  96.  The  liability  of  members  to  fines,  however,  unques- 
tionable as  it  is,  is  nevertheless  sufficiently  guarded  by  certain 
qualifications  as  to  the  fines  themselves,  to  check  any  tempta- 
tion to  run  into  excess  or  abuses  in  this  particular.  In  the 
first  place,  the  very  power  of  imposing  fines  lawfully  and 
effectually  depends  upon,  and  is  measured  by,  statutory  au- 
thority for  that  purpose.2  Without  such,  there  is  no  right  in 
the  building  association  to  fine,  nor  can  it  in  any  degree  ex- 
ceed the  limits  prescribed  by  statute.3 

§  97.  In  the  next  place,  whe.'e  the  power  of  imposing 
fines  is  given  to  building  associations  by  statute,  the  fines  it 
contemplates  are  reasonable  fines,  not  oppressive  penalties ; 
and  where  the  latter  class  is  attempted  to  be  enforced  against 
members,  the  courts  have  nowhere  been  slow  to  relieve  the 
members  and  restrain  the  association.4  The  fine  which  is 

1   Shannon  v.  The  Howard  Mu-  of  interest.   Hagerman  et  al.  v.  The 

tual  Building  Association    of    the  Ohio  Building  and  Savings  Associa- 

City  of  Baltimore,  36  Md.  383.  tion,  25  Ohio  St.  186;  and  see  Shan- 

4  Lincoln  Building  and  Savings  non  v.  The  Howard  Mutual  Build- 
Association,  appellee,  ».  Graham,  ing  Association,  36  Md.  383.  But 
appellant,  7 Neb.  173;  Same  v.  Haas,  see  §§  415-416. 
10  Neb.  581;  Forrest  City  United  4  See  In  re  Tierney,  9  Ir.  R,  Eq. 
Land  and  Building  Association  v.  1;  Lovejoy  v.  Mulkarn,  37  L.  T.. 
Gal  higher  etal.,  25  Ohio  St.  208.  N.  S.  77;  46  L.  J.,  Ch.  Div.  630; 

*  Thus,  where  they  are  authorized  Ingoldby  v.  Riley,  28  L.  T.,  N.  S. 

by  law  as  against  members,   they  55;  Hagerman  et  al.   v.  The  Ohio 

cannot  be  imposed  upon  depositors.  Building  and  Savings  Association, 

Forrest  City,  etc.,  Building  Associa-  25  Ohio  St.  186;  The  Citizens'  Mu- 

tion  v.  Gallagher,  supra.     And  when  tual  Loan  and  Accumulating  Fund 

fines  are  legalized  upon  default  in  Association  t>.    Webster,   25  Barb, 

the  payment  of  dues,  they  are  not,  (N.   Y.)  263;    Second  New    York 

without    special    mention,    charge-  Building     Association    v.    Gallier, 

ithle.  by  virtue  of  a  by-law  to  that  cited  in  foregoing  case.     And  see, 

<  TCI  r,  upon  default  in  the  payment  also,  po>t,  ££  401-118. 


146  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  VI. 

contemplated  by  the  statutes  is  oiie  whose  amount  is  only 
slightly  in  excess  of  the  real  damage  the  building  association 
su>taiii8  from  the  failure  of  a  member  to  pay  his  «lur.-.:  \vhich 
damage  is  equal  to  the  profit  the  association  might  make  upon 
the  money  if  in  its  hands  from  the  day  when  it  was  due;  or, 
as  it  is  said,  equal  to  interest  upon  the  amount,  together  with 
the  proportion  coming  to  it  of  the  then  obtainable  premiums 
upon  the  sale  of  money.* 

§  98.  Finally,  in  order  to  affect  a  member  with  liability 
to  fines,  they  must  be  established  by  charter  or  by-laws.'  It 
is  altogether  necessary  that  every  member  should  be  aware,  in 
advance,  of  the  consequences  of  any  action  or  omission  in 
violation  of  the  rules  of  the  society.  And  if  the  by-laws  im- 
posing them,  by  reason  of  ambiguousness,  admit  of  several 
interpretations,  the  courts  will  adopt  that  most  favorable  to 
the  member,  and  least  favorable  to  the  association.4 

Forfeitures  of  Stock  and  Membership. 

§  99.  Where  the  imposition  of  fines,  for  default  in  pay- 
ments, proves  unavailing  to  secure  a  members  faithful  ob- 
servance of  his  duties,  he  may  become  liable  to  forfeiture  of 
his  membership  in  the  society.  The  continued  and  repeated 
neglect  of  subscribers  to  live  up  to  their  undertakings,  will,  it 
may  readily  be  understood,  have  the  tendency  to  frustrate,  to 
a  large  extent,  the  design  of  the  organization,  which,  though 
it  may  be,  in  a  measure,  made  whole  by  the  ultimate  payment 
of  what  the  member  owes,  together  with  the  fines  accruing 
against  him,  will  be  subject  to  a  variety  of  embarrassments, 
arising  from  the  irregularity  of  its  revenues,  and  the  compli- 
cated and  long-winded  accounts,  the  keeping  of  which  will 
become  necessary  by  reason  of  such  irregularities,  and  which, 
the  society  being  for  the  most  part  composed  of  men  who 
have  all  to  do  they  can  do  to  follow,  with  success,  their  daily 
avocations,  will  make  intolerable  calls  upon  their  time  and 
inexperience,  for  the  purpose  of  avoiding  disastrous  confu- 
sion. Besides  this,  the  societies  are  generally  required  to 
make  to  the  State  an  annual  statement  of  their  assets  and  the 

1   Ocmulgee  Building  and  Loan        8  Building  Association  v.  Schul- 
Association  v. Thomson,  52  Ga.  427.     ler,  3  W.  N.  C.  (Pa.)  4'tt. 
»Ib.  «  See  post,  §§401-419. 


§  102.]  DUTIES   OF  MEMBERS.  147 

value  of  their  shares,  for  the  purpose  of  taxation  or  other  pur- 
poses. The  difficulties  in  the  way  of  this  are  almost  insuper- 
able, when  frequent  and  long-continued  defaults  are  allowed. 
The  rules  of  every  society,  therefore,  establish  a  limit,  beyond 
which  indulgence  cannot  be  claimed  by  derelict  members,  by 
providing  for  the  forfeiture  of  their  shares,  when  that  limit 
is  exceeded,  and  such  rules,  not  imposing  too  short  a  period 
of  grace,  have  expressly,  upon  general  principles  of  law,  been 
held  reasonable  and  within  the  legal  power  of  building  asso- 
ciations.1 

§  100.  Gross  impropriety  of  conduct,  on  the  part  of  a 
member,  may  also  become  the  ground  of  forfeiture,  when  it 
is  specifically  and  distinctly  set  forth  as  such  in  the  charter 
•or  by-laws,  or  for  which  he  is  indictable  by  the  laws  of  the 
land.2 

§  101.  As  in  the  case  of  fines,  so,  in  that  of  forfeitures,  it 
is  necessary  that  the  causes  of  their  occurrence  should  be  dis- 
tinctly defined  by  by-law,3  and  the  method  of  their  enforce- 
ment, as  there  pointed  out,  must  be  followed  exactly.4  Nor 
does  forfeiture  ever  take  place,  until  declared  against  a  mem- 
ber by  the  society  or  its  competent  officers.5  Hence  it  may 
be  waived,  by  implication,  by  the  society  or  its  officers,"  and 
its  enforcement  is,  at  all  times,  at  the  option  of  its  directors.7 

§  102.  Forfeiture  of  stock  is  necessarily  forfeiture  of 
membership,  and  vice  versa ;  and  when  it  takes  place,  the 
obligation  to  continue  the  payment  of  dues,  the  consequence 
and  necessary  incident  of  membership,  is  at  an  end.8 

1  Card  e.  Carr,  1C.  B.,  N.  S.  (87  15  Pa.  St.  251;  Diligent  Fire  Co.  c. 

Engl.  C.  L.  R.)  197;  26  L.  J.,  C.  P.  Commonwealth,  75  Id.  291. 

113.  5  Watkins      t>.      Workingmen's 

8  See  Angell  and  Ames,  Corp.,  §§  Building  Association,  38  Leg.  Int. 

412-417,  and  opinion  of  Tilghman,  (Pa.)  333;  10  W.  N.  C.  414;  97  Pa. 

C.  J.,  in  Commonwealth  v.  St.  Pat-  St.  514;  Reg.   t>.  D'Eyncourt,   116 

rick  Society,  2  Binn.  (Pa.)  441.  Engl.  C.  L.  Rep.  (4 Best  and  Smith) 

*  Butchers'    Beneficial    Associa-  820. 

tion,  38  Pa.  St.  298;  Beneficial  Asso-  «  North  America    Building  As- 

ciation  of  Brotherly  Unity,  Ib.  299.  sociation  v.  Sutton,  35  Pa.  St.  468. 

4  See  Wachtel  v.  The  Noah  Wid-  '  Moore  v.  Rawlins,  6  C.  B.,  N. 

ows'  and  Orphans'  Beneficial  Socie-  S.  289. 

ty,  11  N.  Y.  Weekly  Dig.  457;  Com-  •  McCahan  v.  Columbian  Build- 

monwealth  v.  Pennsylvania  Benefl-  ing  Association  of  East  Baltimore, 

cial  Institution.  2  S.    and  R.   141 ;  40  Md.  226. 
{/omuiouwealth  v.  German  Society, 


148  THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  VL> 

Duty  of  Members  to  Render  Personal  Services. 

§  103.  It  is  a  general  doctrine  that  "  a  corporation  has  a 
right  to  the  service  of  all  its  members,  and  may  make  by-lawa 
to  enforce  it." '  Conversely,  the  individual  members  owe  to 
the  association  such  services  as  it  is  reasonably  within  their 
power  to  contribute,  and  this  duty  may  be  enforced,  by  tines- 
provided  by  charter  or  by-laws,  against  such  members  as  re- 
fuse, without  reason,  to  attend  the  corporate  meetings,"  or  to 
assume  the  functions  of  offices,  to  which  they  may  have  been 
duly  and  properly  elected,'  or  to  give  their  proper  attention 
to  them  when  assumed.4 

Duty  of  Members  to  Contribute,  Pro  Rata,  to  Losses  and  Expenses  of 
Society. 

§  104.  As  members  of  the  corporation,  all  shareholders 
are,  as  to  one  another,  liable  to  bear  their  respective  propor- 
tion of  the  expenses  of  the  concern.  Being  equally  entitled,, 
with  all  the  others,  in  the  direct  ratio  of  his  interest  in  the 
society,  to  share  in  the  common  gains  of  the  enterprise,  every 
member  is  liable  to  contribute,  in  the  same  proportion  in 
which  he  expects  to  profit,  to  the  losses  and  expenses  incident 
to  its  management.5  He  cannot  evade  such  liability  by  a 
transfer  of  his  stock,  without  the  consent  of  the  corporation.* 
Nor  can  he  be  allowed  to  withdraw  from  the  association  for 
the  purpose  of  escaping  his  proportion  of  the  common  bur- 
den.7 

Members  Cannot  Withdraw  to  Evade  Liability  to  Contribute. 

§  105.  Even  when  the  statute  gives  members  the  peremp- 
tory right  to  withdraw,  with  certain  privileges,  upon  certain 
notice  given,  this  right  is  subject  to  modification,  so  as  to  pre- 
vent any  member  from  taking  advantage  of  his  fellows.  In 
a  case  in  Pennsylvania,  arising  at  the  suit  of  a  member 
against  the  association,  which  had  failed  to  make  the  payment 

!  Angell  and  Ames,  Corp.,  §  352.  B  McGrath  v.  Hamilton  Building 

9  Tobacco  Pipe  Makers  v.  "Wood-  Association,  44  Pa.  St.  383. 

roffe,  7  B.  &  C.   838;  5  D.  &  R.  «  Everhart  v.  West  Chester  and 

530;  14  Engl.  C.  L.  Rep.  129.  Philadelphia  R  R  Co.,  28  Pa.  St. 

3  See  Angell  and  Ames,  Corp.,  §  339. 

352.  i  McGrath  v.  Building  Associa- 

4  See  post,  §  220.  tion,  supra. 


§  106.]  DUTIES   OF  MEMBERS.  149 

•demanded  by  him  upon  statutory  notice  of  withdrawal,  the 
association,  in  its  affidavit  of  defence,  averred,  besides  the 
fact  that  the  reserve  provided  for  by  statute  to  accommodate 
withdrawing  members  was  exhausted,  that  the  association 
had,  owing  to  the  depreciation  of  real  estate,  sustained  heavy 
losses,  and  incurred  liabilities  which  should  be  paid  before 
stockholders  were  permitted  to  withdraw.  Upon  this  affi- 
davit being  held  insufficient,  judgment  was  given  against  the 
association  ;  but  it  was  intimated  by  the  court,  that,  had  the 
affidavit  set  forth  losses  incurred  before  the  plaintiff's  with- 
drawal, a  set-off  would  have  been  exhibited,  and  the  decision 
would  have  been  different.1  Such  an  allegation,  in  a  later 
case,  was  held  sufficient  to  prevent  judgment.3  It  amounts 
to  a  defence  to  the  extent  of  the  withdrawing  member's  pro- 
portionate share  in  the  association's  liabilities  ;  in  other  words, 
a  member  cannot,  by  withdrawing,  evade  his  proportionate 
share  in  the  expenses,  losses,  and  debts  of  the  association.  The 
association  has  the  right  to  deduct  it  from  the  amount  other- 
wise coming  to  him  upon  legal  notice  of  withdrawal.  And 
the  society  has  the  right  to  retain  from  withdrawing  stock- 
holders their  proportion  of  probable  loss  sustained  by  reason 
of  the  purchase  of  real  estate  sold  on  its  mortgage,  which  had 
depreciated,  even  before  the  loss  has  been  finally  determined 
by  the  sale  of  the  real  estate,  where  it  is  evident  there  will 
be  a  loss.  The  society  may  have  the  property  appraised  by  a 
committee,  and  fix  the  loss  and  assess  the  same  on  each  share 
of  stock  pro  rata.* 

Liability  to  Contribute  not  Affected  by  Taking  Loan. 

§  106.  Nor  is  this  liability  in  any  way  affected  by  the  fact 
that  the  member  has  become  a  borrower,4  so  long  as,  being 
such,  he  still  continues  in  membership.  Whilst  merely  an 

1  United    States    Building    and  *  "VVittman  v.  Building  Associa- 

Loan  Association  v.  Silverman,  85  tion,  7  W.  N.  C.  (Pa.)  80,  Ludlow, 

Pa.   St.  394;  4  W.  N.  C.  546;  85  P.  J. 

Leg.  Int.  51.     Of   course,  no  con-  » Knoblauch     v.     Robert     Blum 

tribution  can  be  asked  of  a  person  Building  and  Loan  Association  No. 

upon  losses  accruing  to  the  society  2,  8  Pittsb.  Leg.  Jour.,  N.  S.  89; 

subsequently  to  the  time  when,  un-  Paffert  ».  Same,  Ib.  40. 

der  the  statute  or  by-laws,  as  the  4  Pattison  v.  The  Albany  Building 

case  may  be,  the  withdrawal  took  and  Loan  Association,  63  Ga.  373. 
effect 


150  THE  LAW  OF  BUILDING   ASSOCIATIONS.         [CH.  VI. 

investing  member,  his  stock  is  chargeable  with,  and  he,  by  vir- 
tue of  his  ownership  of  that  stock,  is  liable  for,  a  proportion- 
ate share  of  the  expenses  of  the  enterprise.     It  certainly  can- 
not be  that  the  fact  of  his  having  received  a  benefit  from  the 
society  should  operate  to  relieve  him  of  that  obligation.     If, 
in  obtaining  that  benefit,  he  relinquishes  his  membership,  the 
duty  to  contribute,  of  course,  falls  with  it,  because  its  advan- 
tages have  ceased.     But  if  he  retains  his  standing  as  a  mem- 
ber, he  retains  also  his  privileges  and  burdens  as  such,  and  if, 
by  his  subsequent  defaults,  he  forfeits  his  membership,  and 
his  debt  becomes  collectable  against  him,  his  mortgage  will 
stand  as  a  security  for  his  proportionate  share  of  the  losses 
and  expenses  of  the  society.     This  is  the  doctrine  distinctly 
held  in  a  case  which  arose  in  Pennsylvania.1     The  building 
association   had   been   incorporated  under  the  Act  of  1851, 
under  which  building  associations  were  allowed  to  recover 
only  the  amount  loaned  with  interest.     The  facts  of  the  case, 
incorporated  in  a  case  stated,  were  these :  The  defendant  was 
the  owner  of  thirty-three  shares  of  stock  of  the  association, 
and,  in  the  months  of  February  and  March,  185-i,  borrowed 
money  of  the  building  association,  at  32£  and  32^  per  cent,  pre- 
mium, giving  a  mortgage  for  the  nominal  whole  amount. 
Expenses  had  been  incurred  in  the  business  and  management 
of  the  association,  such  as  room-rent,  account  books,  officers' 
salaries,  etc.,  equal  to  four  dollars  upon  each  share  of  the 
stock.     By  the  annual  reports  of  the  association,  the  profits 
on  each  share  of  stock,  above  legal  interest  on  the  amount 
paid  in,  were  more  than  sufficient  to  pay  all  expenses,  said 
profits  being  derived  from  premiums,  fines,  and  profits  on  re- 
loans,  none  of  which  premiums  or  fines  were  paid  by  the  de- 
fendant, (as  they  could   not  lawfully   have   been    enforced 
against  him.)     The  reasoning  of  the  court  was  substantially 
as  follows :  As  a  mortgagor,  he  could  not  be  compelled  to 
pay  more  than  the  sum  actually  advanced,  with  legal  interest. 
Had  he  remained  a  member,  he  could  have  claimed  a  share  in 
the  society's  profits.     He  would  then  have  received  a  benefit 
from  the  payments  made  by  others.     Whatever  payments  he 
had  made,  had  not  swelled  the  common  fund ;  for  he  was  en- 
titled to  credit  for  them  by  way  of  set-off  against  his  mort- 
1  McGrath  t>.  Hamilton  Savings  and  Loan  Association,  44  Pa.  St.  383. 


§  107.]  DUTIES  OF  MEMBERS.  151 

gage.  If,  then,  in  addition,  he  could  have  balanced  the  lia- 
bilities which  he,  as  a  member,  had  incurred  in  respect  of  the 
common  expenses,  by  a  share,  equal  to  those  liabilities,  of  the 
common  profits,  he  would,  in  effect,  be  recovering  more  than 
he  had  paid  in,  and  would  be  throwing  upon  his  associates  the 
whole  of  a  burden,  which,  in  truth,  was  his"  as  much  as  theirs. 
To  this  was  added  another  consideration.  Under  the  inter- 
pretation given  to  the  Act  of  1851,  in  Pennsylvania,  as  has 
been  said,  building  associations  could  recover  from  borrowers 
only  the  amount  actually  loaned,  with  legal  interest.  What- 
ever premiums,  etc.,  had  been  paid  by  the  borro\ver,  he  must 
be  allowed  credit  for  under  his  obligation.  This  was  the 
right  of  every  borrower  in  the  society,  and  it  must  hold  itself 
in  readiness  to  answer  the  same  call  from,  perhaps,  its  whole 
membership.  Whence,  then,  would  the  means  for  defraying 
the  expenses  of  the  enterprise  come  ?  The  doctrine  forced 
itself  upon  the  court,  that  the  building  association  must  have 
the  right  to  treat  the  payments  made  by  borrowing  members 
and  others,  whilst  their  membership  lasted,  as  contributions, 
so  far  as  they  were  needed,  to  defray  the  expenses  of  the  so- 
ciety and  make  good  its  losses.  A  deficit,  equal  to  their  re- 
spective shares  of  such  expenses  and  losses,  would  thus  appear 
upon  their  subscription  and  interest,  which  the  building  as- 
sociation might  recover  properly  upon  the  mortgage  given  to 
secure  the  debt. 

§  107.  This  reasoning  is  undoubtedly  good  upon  the  hy- 
pothesis underlying  it :  to  wit,  the  right  of  the  borrower  to 
claim  credit  for  all  his  payments  and  agreed  premiums.  But 
this  hypothesis  has  no  foundation  whatever  where  premiums, 
fines,  etc.,  are  legalized.1  All  that  the  borrower  can,  in  such 
case,  ask  credit  for,  is  what  he  has  actually  paid  in  by  way  <>f 
subscriptions  and  interest."  The  building  association  .  may 
enforce  the  premium,  and  recover  the  fines  incurred.  And 
yet  the  same  conclusion  which  was  reached  in  the  above  case, 

'Mechanics'  Building  and  Loan  l  Walking  p.  "Workingmen's  Build- 
Association  of  New  Brunswick  r.  ing  and  Loan  Association,  10  W.  N. 
Conover  et  al.,  1  McCart.  (X.  J.)  C.  (Pa.)  414;  38  Leg.  Int.  333;  97 
219,  not  reversed  in  this  particular  Pa.  St.  514,  and  see  post,  §§  128- 
in  2  C.  E.  Gr.  (N.  J.)  497;  and  see  130. 
post,  §§  453-457. 


152  THE  LAW  OF  BUILDING   ASSOCIATIONS.        [CH-  VI- 

must  inevitably  follow,  with  logical  necessity,  upon  this  latter 
basis  also.  Remembering  that  the  borrower  is  a  member, 
and  not  the  less  so  for  being  a  borrower;  that,  consequently, 
his  liability  for  his  share  of  the  expenses  is  complete  during 
the  continuance  of  his  membership ; — it  is  clear,  that,  had  he 
remained  a  member,  he  might  eventually  have  set  off  a  por- 
tion of  the  profit  accruing  to  him  from  the  common  fund, 
against  his  proportion  of  the  common  expenses.  By  becom- 
ing a  defaulter,  he  simply  loses  that  right,  or  expectancy,1 
and  gains  nothing  in  the  way  of  shaking  off  responsibilities 
already  incurred.  Now,  his  mortgage,  conditioned  for  the 
faithful  performance  of  his  membership  duties,  includes,  be- 
yond question,  that  of  sharing  in  the  expenses  of  the  society, 
and  may  be  used  by  it  for  the  purpose  of  enforcing  such  con- 
tribution.3 

Termination  of  Liability  to  Contribute. 

§  108.  The  liability  to  contribute  to  expenses  ceases  with 
the  cessation  of  membership,  bonafide,  and  with  the  consent 
of  the  association.  If,  upon  becoming  a  borrower,  the  mem- 
ber relinquish  his  membership ;  *  or  if,  being  an  investor 
merely,  he  avail  himself  of  a  provision  in  the  rules  or  by-laws- 
of  the  association,  or  of  the  statute  supreme  over  it,  to  with- 
draw himself  from  it,4  he  cannot  subsequently  be  made  liable 
for  its  debts  and  losses,  and  called  upon  by  the  society  to 
contribute  towards  their  payment. 

§  109.  The  same  result  (at  least,  as  between  the  building 
association  and  the  member)  follows  when  the  latter,  under  a 
resolution  of  the  society  permitting  borrowers  to  withdraw 
on  the  payment  of  a  stipulated  amount,  the  stock  to  be  then 
"  withdrawn  and  cancelled,"  withdrew,  and  paid  off  his  loans, 

1  Watkins  ».  Workingmen's  Build-  8  Such  a  person  is  described  as  one 

ing  and  Loan  Association,  supra,  whose  only  relation,  thereafter,   to 

and  see  post,  §  175.  the  association,   is  that  of  debtor. 

*  This  is  in  every  sense  analogous,  Bowker  v.  Mill  River  Loan  Fund 
and  stands  upon  the  same  ground  Association,  7  Allen  (Mass.).  100. 
of  right,  as  the  propositions  already  4  The  notice  of  withdrawal  murks 
laid  down  with  reference  to  the  en-  the  time  of  the  cessation  of  the  mem- 
forcement  of  subscriptions  upon  bership,  the  time  elapsing  till  pay- 
mortgages,  the  principal  debt  se-  meut  of  the  stock  can  be  demanded, 
cured  by  which  lias  been  discharged,  being  merely  a  provision  for  the 
See  ante,  §§  88-91.  convenience  of  the  society. 


§  110.]  DUTIES   OF   MEMBERS.  153 

whereupon  his  stock  was  marked,  on  the  books,  as  "  cancelled 
and  withdrawn."  It  was  held,  in  such  a  case,  that  the  building 
association,  becoming  embarrassed  by  liabilities,  could  not  after- 
wards recover  for  dues  which  would  have  subsequently  accrued 
on  said  stock.  The  relative  position  of  the  parties  was  that  of 
debtor  and  creditor ;  and  after  an  acceptance  of  the  terms  of 
the  resolution,  and  payment  by  the  debtor  of  the  sum  found 
thereby  to  be  due,  the  new  contract  became  executed,  and  a 
case  of  accord  and  satisfaction  was  made  out.1  The  fact  that 
the  sum  so  fixed  for  the  payment  in  full  was  subsequently 
found  insufficient  to  meet  the  exigencies  of  the  society,  will 
not  avail  to  impose  any  further  liability  upon,  or  give  the 
building  association  any  further  claim  against,  the  member  who 
withdrew  under  such  an  arrangement.2  And,  though  there 
may  be  doubts  as  to  the  validity  of  the  resolution  under  which 
it  was  consummated,  the  building  association,  having  had  the 
benefit  of  it,  is  estopped  from  denying  such  validity,3 — just 
as  a  shareholder,  v  ID,  in  his  turn,  benelitting  by  such  an  op- 
portunity thus  o.  cr  1  by  the  association,  has  assumed  certain 
obligations,  in  er.clunge  for  others,  cannot  be  relieved  from 
them  upon  the  plea  of  illegality  in  the  conduct  of  the  officers 
of  the  association  in  sanctioning  the  arrangement.4 

Personal  Liability  of  Stockholders  for  Debts  of  Society. 

§  110.  As  to  the  extent  of  the  individual  liability  of  mem- 
bers of  building  associations  to  third  parties  for  the  debts  of 
the  corporation,  this  is  a  matter  which  depends  largely  upon 
the  statutes  of  the  State  in  which  it  may  be  located.  It  has 
already  been  intimated,  that,  before  the  incorporation  of  the 
society,  care  and  economy  should  be  exercised  by  the  parties 
conducting  the  scheme  with  reference  to  the  expenses  they 

1  Miller  ».  Jefferson  Building  As-  and  what  is  unwise  and  imprudent; 

sociation,  50  Pa.  St.  32.  upon  that  point  the  judgment  of  the 

9  Priestly  v.  Hopwood,  12  W.  R.  individual  is  subject  to  that  of  no 

1031;  10  L.  T.(  N.  S.  646.     "The  other  tribunal."     Hunt,  J.,  in  Jef- 

right  of  an  individual  or  a  corpora-  fries  v.  Life  Insurance  Co.,  22  Wall, 

tion  to  make  an  unwise  bargain  is  (U.  S.)  47  (53). 

as  complete  as  that  to  make  a  wise  3  Miller  v.  Jefferson  Building  As- 

bargain.     The  ri^ht  to  make  con-  sociation,  supra, 

tracts  carries  with  it  the  right  to  de-  4  Hoboken    Building  Association 

termine  what  is  prudent  and  wise,  v.  Martin,  2  Beas.  (N.  J.)  428. 


154  THE  LAW  OF  BUILDING  ASSOCIATIONS.          [CH.  VI. 

incur,  as,  BO  f afr  as  these  are  concerned,  the  individual  liability 
of  the  persons  contracting  is  unquestioned,  even  after  the  in- 
corporation is  effected,  and  although  the  society  agree  to  un- 
dertake the  payment.1  Towards  liabilities  assumed  by  the 
association  subsequently  to  its  incorporation,  the  members,  in 
the  absence  of  any  statutory  exception  made  as  to  them,  hold 
the  same  relations  as  the  members  of  any  other  corporation 
have  to  its  indebtedness.  An  examination  of  the  details  of 
this  question  is  quite  beyond  the  scope  and  purpose  of  this 
treatise.  The  general  doctrine  is,  that  a  member's  liability 
is  equal  to  the  extent  of  his  stock-interest  in  the  association  ; 
i.e.,  to  the  par  value  of  the  stock  he  holds  in  his  name,  to- 
gether with  the  unpaid  subscriptions  thereon."  And  if  he 
be  himself  a  creditor  of  the  association,  he  may  set  off  his 
claim  against  his  liability.3 

Corporate  Property  may  be  Followed  into  Hands  of  Stockholders. 

§  111.  Property  which  was  owned  by  the  association  may, 
under  circumstances,  become  liable  for  its  debts  in  the  hands 
of  stockholders  to  whom  it  has  been  transferred.  For  whilst 
the  doctrine,  that  "  the  law  recognizes  only  the  creature  of 
the  charter,  and  knows  not  the  individuals," 4  in  general 
holds  out  a  protecting  hand  over  the  stockholder  who  no 
longer  bears  that  relation  to  the  company,  who  has  settled 
with  it,  and  become  a  bona-fide  holder  of  its  property ;  yet  a 
stockholder  is  not  entitled  to  any  share  of  the  capital  stock, 
or  dividends  of  the  profits,  until  all  the  corporation's  debts 
are  paid.  The  property  of  the  corporation  is  regarded  as 
held  by  it  in  trust  for  the  payment  of  its  debts ;  *  and  if  a 

1  See  ante,  §  50.  in  another  action  begun  later.)    See 
*  State    Savings    Association    ».  also  cases  in  next  note. 
Kellogg  et  al.  63  Mo.  540.     (It  is  »  Remington  «.   King,   11  Abb. 
there  said  that  the  institution  of  Pr.  (N.  Y.)278;  cit.  Briggs  v.  Pen- 
suit  against  a  member,  for  a  corpo-  niman,  8  Cow.  (N.  Y.)  387;  Tall- 
rate  debt  of  the  association,  does  not  madge  v.  The  Fishkill  Iron  Co.,  4 
operate  as  a  lien  upon  his  limited  Barb.  (N.  Y.)  382. 
liability  under  the  statute,  so  as  to  4  Angell  and  Ames,  Corp.,  §  595. 
hold  him  therefor  against  a  senior  5  Field,  Corp.,  §  143;  cit.  Chicago, 
iudgment,  and  execution  obtained  etc. ,  R.  R.  Co.  v.  Howard,  7  Wall. 

(U.  S.)  392. 


§  111.]  EIGHTS  OF   MEMBERS.  155 

stockholder  in  an  insolvent  building  association  accept  its 
real  estate  in  payment  of  his  stock,  it  will  be  affected  with 
that  trust  in  his  hands,  and  the  purchaser,  though  there  was 
a  valuable  consideration,  will  be  liable  for  its  value  to  the 
creditors.1  So,  too,  where  the  trustee  of  a  building  associa- 
tion purchased  lands,  paying  one-fourth  of  the  purchase 
money,  and  agreeing  to  execute  a  legal  mortgage,  if  required 
so  to  do,  for  the  balance,  the  vendor  retaining  the  conveyance ; 
the  members  of  the  society  to  whom  the  land  was  allotted, 
and  who  paid  their  purchase  money  to  the  building  associa- 
tion, without  inquiring  into  the  title,  were,  upon  a  bill  filed 
against  them  by  the  original  vendor,  after  failure  on  the  part 
of  the  trustees  to  pay  the  balance  of  the  purchase  money,  for 
which  no  legal  mortgage  had  been  given  by  the  trustees,  de- 
creed to  pay  the  same, — otherwise  the  estate  to  be  sold.  And 
in  case  any  of  the  allottees,  less  than  the  whole  number, 
should  liquidate  the  claim,  the  others  were  ordered  to  con- 
tribute,— otherwise  their  land  to  be  sold  to  discharge  what 
was  due  in  respect  thereof.2 


CHPATER  VII. 

RIGHTS  OF  MEMBERS. 

§  112.  Classification  of  rights  of  members. 

§  113.  General  rights  as  corporators. 

§  115.  Nature  of  the  right  to  receive  loan. 

§  117.  Right  of  members  applying  for  loan  to  be  preferred  over  outside 

investments.     Purpose  of  building  associations. 

§  122.  Highest  bidder  to  receive  loan.     Minimum  premiums. 

§  123.  Right  to  claim  loan  depends  upon  ability  to  furnish  security. 

§  124.  Member  cannot  maintain  assumpsit  for  promised  loan. 

1  Chambersburg  "Woollen  Co.  v.  *  Peto  v.  Hammond,  8  Jur.,  N. 
Chambersburg  Manufacturing  and  S.  550;  31  L.  J.,  Ch.  354;  30  Beav. 
Building  Association,  31  Leg.  Int.  495.  Persons  buying  from  building 
(Pa.)  357.  associations  must  examine  the  title 

they  buy. 


156  THE   LAW   OF  BUILDING   ASSOCIATIONS.         [CH.  VII. 

§  125.  Society  need  not  inquire  into  purpose  or  application  of  loan. 

§  126.  Proportion  of  loan  grantable  to  applicant's  stock-interest. 

§  127.  Right  of  withdrawal;  its  foundation,  nature,  and  extent. 

§  128.  Right  to  withdraw  does  not  involve  right  to  account  of  profits. 

§  130.  Amount  withdrawable  by  any  member. 

§  131.  Statutory  terms  of  withdrawal. 

§  132.  Charter  and  by-law  provisions,  as  to  the  withdrawal,  inconsistent 
with  statute,  void. 

§  133.  Terms  of  withdrawal,  deviating  from  prescribed  rule,  may  be- 
come binding  on  society. 

§  134.  Regulation  of  withdrawals  by  charter  or  by-laws,  construc- 
tion. 

§  135.  Officers  cannot  exercise  discretion  in  approving  withdrawals 
arbitrarily. 

§  186.  Withdrawing  member  becomes  a  mere  creditor  of  the  society. 

§  137.  Withdrawing  member  may  proceed  to  judgment  against  society 
for  amount  due  him. 

§  138.  Discretion  of  courts  as  to  execution  against  society. 

§  139.  Society  to  keep  funds  available  for  withdrawing  members. 

§  140.  Statutory  limitation  of  funds  available  for  withdrawing  mem- 
bers. 

§  141.  Effect  thereof  upon  right  to  enforce  payment  by  suit. 

§  144.  Stockholder  cannot,  qua  stockholder,  sue  society  at  law  for  value 
of  paid-up  stock. 

§  145.  Member  may,  under  circumstances,  compel  settlement  in 
equity. 

§  146.  Foundation  of  the  principles  applicable  to  borrowers.  Mutual- 
ity of  the  scheme.  Membership  of  borrowers. 

§  149.  Elements  of  contract  between  borrowing  members  and  society. 

§  151.  Borrowing  member  cannot  withdraw. 

§  152.  Right  of  voluntary  repayment. 

§  154.  Terms  of,  and  rules  for,  voluntary  repayment  in  the  absence  of 
special  by-laws  or  statutory  provision. 

§  158.  Voluntary  repayment  under  the  provisions  of  the  articles.  Eng- 
lish decisions. 

§  165.  Importance  of  English  cases  in  America.     Exceptions. 

§  167.  Construction  of  provisions,  favoring  right  of  repayment. 

§169.  Rights  as  to  repayment  at  time  of  loan  cannot  be  varied;  but 
special  arrangements,  agreed  to  by  member,  conclude  both 
parties. 

§  171.  Member  cannot  claim  benefit  of  special  arrangement  unless  he 
consent  to,  and  carry  out  its  terms;  except  where  value  of  stock 
changed  with  a  view  to  dissolution,  etc. 

§  173.  Borrowing  members,  being  a  majority,  cannot  force  terms  upon 
investors,  involving  discontinuance  of  society. 

§  174.  Repayment  upon  decease  of  borrowing  member,  and  judicial 
sale  of  property. 

§  175.  Rights  of  members  upon  forced  repayments  on  default. 

§  176.  Borrower's  membership  not  necessarily  forfeited  by  suit  upon 
default.  Statement  of  account  in  equity. 


§  113.]  RIGHTS   OF   MEMBERS.  157 

§  178.  Tender.     Effect  of  refusal  to  accept  by  society. 

§  179.  Costs  in  redemption  and  foreclosure  suits. 

§  180.  Redemption  in  permanent  societies.     Liability  of  members. 

Classification  of  Rights  of  Members. 

§  112.  In  treating  of  the  rights  of  members  of  building 
associations,  it  will  be  necessary,  in  order  to  avoid  confusion, 
to  consider  the  subject,  first,  briefly  and  generally,  in  relation 
to  them,  as  members  of  the  corporation,  or  corporators ; 
secondly,  with  peculiar  reference  to  their  status  as  investors ; 
and  thirdly,  in  like  manner,  as  borrowers. 

General  Rights  as  Corporators. 

§  113.  In  their  capacity  of  corporators,  the  members  of  a 
building  association  have  the  same  rights,  in  every  respect,  so 
far  as  may  be  applicable,  as  are  conceded  to  the  members  in 
any  other  corporation.  Such  is  the  right  to  attend  the  cor- 
porate meetings,  and  to  receive  the  proper  notification  of 
the  time  and  place  of  its  occurrence ;'  as  well  as  the  right 
of  voting  at  the  same.  It  has  been  a  custom  in  building 
associations,  since  their  inception,  and  one,  it  seems,  very 
generally  followed,  to  allow  every  member  but  one  vote, 
irrespectively  of  the  number  of  shares  he  may  hold.1  Some- 
times this  rule  is  established  by  the  constitution  or  statute,  and 
again  it  is  followed  by  a  sort  of  tacit  understanding,  and  general 
consent.  Its  reason,  or  origin,  at  least,  may  be  found  in  the 
primary  character  of  building  associations  as  institutions,  not 
for  the  enrichment  of  capitalists  who  could  afford  numerous 
shares,  but  for  the  safe-keeping  and  fructifying  of  the  pit- 
tance of  the  inopulent  and  industrious ;  not  for  the  hoarding 
of  great  sums  to  be  increased,  under  the  pretence  of  philan- 
thropy, at  exorbitant  rates  of  interest, — but  for  the  accumu- 
lation of  a  modest  sum,  wherewith  to  secure  a  homestead 
sufficient  for  the  wants  of  artisans,  mechanics,  or  small  trades- 
men. Each  single  share — as  will  be  seen,  for  instance,  in  the 
account  given  of  the  Greenwich  Union  Building  Association* 
— represented  such  an  amount ;  and  every  member  held  but 
one.  Indeed,  it  was,  at  one  time,  considered  doubtful, 
whether,  under  a  statute  in  which  shares  were  authorized  as 

1   As  to  the  corporate  meeting,         s  Barry,  Law  of  Building  Socie- 
with  nil  its  incidents,  see  post,  §§     ties.  p.  28.     See  §  441,  §  68,  note. 
1^2-190.  'See  ante,  §5. 


158  THE   LAW   OF   Bt'ILLUNli    ASSOCIATIONS.        [CU.   VII. 

not  exceeding  a  certain  amount  for  each  share,  a  member 
could  lawfully  hold  more  than  one  share.  Otherwise,  what 
purpose  was  to  be  served  by  limiting  the  shares  to  a  fixed 
amount,  if  a  member  could  hold  any  number  of  them?' 
Subsequently,  it  was  held,  under  the  same  statute,  that  a 
member  might  take  more  than  one  share  of  the  fixed  value,2 
and  the  question  does  not  appear  to  have  been  again  raised. 
Yet  the  new  doctrine  and  practice  have  not  entirely  changed 
that  remnant  of  the  old  which  restricts  a  member  to  the  right 
of  casting  a  single  vote,  no  matter  how  large  his  interests 
may  be  in  the  society.  And  the  vote  must  be  cast  in  person, 
unless  there  is  special  authority  for  proxies  in  the  constitution 
or  by-laws.'  But  a  pledgor  of  his  stock  retains  his  rights  to 
vote  and  hold  office  as  a  member.* 

§  114.  To  be  elected  to,  and  to  hold,  office,  to  have  access 
to  the  corporate  books ;  in  proper  cases  to  institute  and  con- 
duct proceedings  against  unfaithful  and  negligent  officers  for 
the  protection  of  the  stockholders^ 5  or  to  compel  lawful  action 
on  their  part,  by  restraining  their  unlawful  projects,'  to  sue 
the  corporation  upon  claims  not  arising  out  of  the  relations  of 
membership  in  it,T  and  ultimately,  upon  the  termination  of 
the  scheme,  to  share  in  its  profits,  and  even,  in  proper  cases, 
to  apply  to  the  court  having  jurisdiction  to  dissolve  or  wind 
np  the  concern,8  are  equally  prerogatives  of  membership, — 

1   Cutbill  v.  Kingdom,  17  L.  J.,  McCart.  (N.  J.)  219,  not  disturbed 

Ex.  177;  1  Exch.  494.  in  this  particular  in  2  C.  E.  Gr.  (N. 

*  Morrison  n.  Glover,  19  L.  J  ,  Ex.  J.)  497. 
20,  25;  4  Exch  430;  and  see  Barry,  B  See  post,  §  213. 
Law  of  Building  Societies,  p.  6,  §  •  Grimes  v.  Harrison,  28  L.  J., 
12,  following  the  latter  case;  14  L.  Ch.  823;  33  L.  T.  Rep.  115:  5  Jur., 
T.  Rep.  204;  14  J.  P.  84.     There  is  N.  S.  528.  26  Beav.  435;  23  J.  P. 
no  restriction  upon  the  number  of  421.    A  single  shareholder  can  main- 
shares  any  member  may  hold,  unless  tain  such  an  action.     See  Atwood 
imposed  by  statute,  charter,  or  by-  t>.  Merry  weather,  L.  R.,  5  Eq.  464, 
law.  n. ;  Clinch  v.  Financial  Corporation, 

8  Angell  and  Ames,   Corp.,    §§  Id.  450,  L    R.  4,  Ch.  117;  Menier 

128-9,  130:  Davis,  Law  of  Building,  t>.   Hooper's  Telegraph  Works.   L. 

etc.,  Societies,  88.  R.  9   Ch.  350  ;    Russell  v.  Wake- 

4  Angell  and  Ames,  Corp..  §  132;  field  Water  Works,  L.  R,  20  Eq. 

Field,  Corp.,  233;  Mechanics'  Build-  474. 

ing  and  Loan  Association  of  New  T  See  post,  §§  264-268. 

Brunswick   t>.    Conover   et   al.,   1  8  See  post,  §§  488-491. 


§  115.]  BIGHTS   OF   MEMBERS.  159 

together  with  others  which  it  is  needless  to  mention,  being, 
in  a  great  measure,  merely  the  converse  of  the  rights  of  the 
society  against  the  members,  and  of  the  duties  of  the  latter  to 
the  former.  Many  are  in  no  wise  distinctive  of,  or  peculiarly 
significant  to,  building  associations,  and  their  details  belong 
more  properly  to  a  work  upon  the  law  of  corporations  gen- 
erally, which  is  not  intended  to  be  herein  embraced.  To 
them,  and  to  such  incidental  mention  as  may  be  given  to 
these  particulars,  in  this  treatise,  under  appropriate  heads,  the 
reader  must  be  referred. 

Nature  of  the  Right  to  Receive  Loan. 

§  115.  The  most  important  privilege  which  a  member  in 
a  building  association,  by  virtue  of  his  being  a  shareholder 
and  investor — the  privilege,  indeed,  which  draws  that  class  of 
men  into  its  circle,  of  whom  legitimately  the  membership 
ought  to  be  composed,  and  for  whose  benefit  the  whole 
scheme  was  invented,  and  countenanced  by  law, — is  that  of 
receiving  loans  or  advances  '  from  the  association,  upon 
proper  security  furnished  by  the  borrower,  or  advanced  mem- 
ber. It,  no  doubt,  lay  in  the  original  plan  of  the  institution, 
that  every  member  should  eventually  become  a  borrower.2 
Certainly  every  sneinber  has  the  right  to  become  such,  pro- 
vided he  can  give  the  society  such  guarantees  against  losses 
as  prudence  and  good  business  management  require,  and  is 
willing  to  pay  the  premium  which  fair  competition  with 
other  members  desirous  of  obtaining  the  same  benefit  may  tix 
as  the  value  of  his  preference.  In  order  to  serve  this  purpose 
the  more  effectually ,  by  prescribing  the  periods  and  manner 
in  which  these  loans  are  to  be  granted  by  the  association,  and 
making  these  directions  obligatory  upon  it,  as  well  as  notori- 
ous and  intelligible  to  the  members,  many  of  the  statutes 
governing  building  associations  require  their  officers  to  offer 
the  money  on  hand,  when  it  a'mounts  to  a  certain  sum,  at 
stated  periods,  for  sale  to  the  stockholders,  and  to  award  the 
loans  to  the  highest  bidder. 

1  The  words   "loan"  and   "ad-  being  attached  to  the  one  distin- 

vance,"  and  their   derivatives,  are  guishing  it,  in  legal  effect,  from  the 

used  interchangeably  in  this  work,  other,  unless  expressly  pointed  out. 

as  in  popular  speech,  no  significance  *  See  ante,  §  40 


ICO  THE   LAW   OF   BUILDING    ASSOCIATIONS.        [CH.  VII. 

Right  of  Members  Applying  for  Loan  to  be  Preferred  over  Outside  In- 
vestments.    Purpose  of  Building  Associations. 

§  116.  Where  such  a  provision  is  contained  in  the  statute 
supreme  over  the  building  association,  or  is  incorporated  in 
the  charter,  it  follows  (1)  that  the  members  are  entitled  to  the 
refusal  of  the  money ;  (2)  that  the  highest  bidder  at  the  sale 
must  be  awarded  the  loan,  if  he  can  give  proper  security  ; 
and  (3)  it  seems  to  be  a  necessary  result  of  such  provision  of 
the  statute,  that  the  building  association  is  absolved  from  in- 
quiring into  the  application  of  the  money  loaned,  by  the  bor- 
rower. 

§  117.  It  may  become  a  question  of  some  nicety,  exactly 
how  far  the  building  association  is  bound  to  accommodate  its 
members,  to  the  exclusion  of  outside  investments.  Where 
expressly  authorized  by  statute  so  to  do,  a  building  association 
has  the  right  to  lend  its  money,  not  only  to  members,  but 
also  to  strangers.1  Yet  such  loans  must  be  regarded  as  shifts, 
allowable,  from  the  necessities  of  the  case,  for  the  purpose  of 
obviating  the  contingency  of  its  funds  remaining  idle  upon 
its  hands,  for  lack  of  members  to  take  them  up.  If  there  1)3 
any  such,  desirous  of  obtaining  the  money,  and  capable  of 
satisfying  the  society  as  to  the  security  receivable  by  it  to 
make  the  loan  safe,  the  association  is  obliged  to  give  it  to  him, 
though  the  profit,  in  that  case,  may  be  smaller  than  if  it  were 
allowed  to  choose  another  investment  offering  at  the  same 
time.  Under  some  statutes,  too,  building  associations  are  al- 
lowed to  use  their  funds  in  the  purchase  of  real  estate.  Where 
this  is  the  case,  opportunities  may  frequently  present  them- 
selves of  making  most  desirable  investments,  quite  as  secure 
and  far  more  proiitable  than  loans  to  members  at  any  practi- 
cable premium.  Yet,  if  the  statute  or  rules  contain  the  re- 
quirement referred  to,  the  obligation  resting  upon  the  associa- 
tion admits  of  no  cavil, — that  the  members  should  be  given 
the  preference.  Indeed,  it  seems  clear,  that  such  would  be 
the  duty  of  the  association,  and  the  right  of  the  member,  even 
were  the  statute  bare  of  any  command  to  that  effect ;  and 
that  the  provision  contained  in  the  Act  of  1850  in  Con- 

1  Union  Building  Loan  Associa-  Brunswick  et  al  ,  2  Stewart  (N.  J.), 
tion  of  New  Brunswick  t>.  The  Ma-  359:  Cutbill  T.  Kinpdora,  1  Exch. 
sonic  Hall  Association  of  New  494;  17  L.  J.  Exch.  177. 


I  118.]  iUGillS   OF    MEMBERS.  161 

iiecticut,  prohibiting  building  associations  from  loaning  money 
to  outsiders  where  there  were  members  willing  to  take  it,  and 
capable  of  giving  proper  security  for  it,'  was  but  the  ex- 
press declaration  by  one  Legislature  of  the  thought  and  intent 
in  the  minds  of  all  the  others. 

§  118.  If  we  consider  the  reasons  which  may  be  assumed 
to  have  guided  Legislatures  in  conferring  upon  building 
associations  the  extraordinary  privileges  and  immunities 
which  they  enjoy,  it  will  be  readily  understood,  (and  there 
can  be  no  other  apology  for  it,)  that,  at  the  bottom  of  it  all,  is 
a  motive  of  public  policy. *  The  primary  design  of  building 
associations  is,  to  encourage  the  acquisition  of  real  estate,  the 
building  of  dwellings,  the  ownership  of  homesteads, — to  in- 
crease the  proportion  of  property  holders  among  that  class  of 
the  population  whose  slow  and  laborious  earnings  are,  by 
reason  of  their  pettiness,  most  fugitive,  and  generally  spent 
before  they  reach  a  sum  of  sufficient  magnitude  to  back  a 
desire  for  those  guarantees  of  good  citizenship,  which  the 
policy  of  our  law  has  always  found  in  landed  property.  That 
is  the  class  for  whose  benefit  building  associations  were  origi- 
nally devised ;  from  among  whose  number  their  membership 
was,  and,  for  the  most  part,  still  is,  drawn ;  and  all  the  inci- 
dents of  membership  were  designed  to  accommodate  their 
necessities,  and  intended  to  serve  their  purposes.  It  is,  there- 
fore, asserted  by  the  courts  of  Pennsylvania,  that  an  associa- 
tion for  the  "  accumulation  of  a  fund  by  the  savings  of  its 
members,  to  build  or  purchase  for  themselves  dwelling-houses 
or  real  estate,  or  to  enter  into  business;  "  8  or  merely  for  the 
purpose  of  loaning  money  to  its  members,  not  expressing  any 
intention  to  further  the  erection  and  acquisition  of  hoine- 
Htfads,4  was  not  a  building  association  within  the  meaning 
of  the  Legislature.  And  the  courts  of  other  States,  holding 
that  fundamental  object  in  view,  have  not  hesitated  to  declare 
contracts*  made  with  building  associations,  and  rules  and 

1  See  The  Mechanics  and  Work-  Association  T.  Sutton,  35  Pa.  St.  463 

ingmen's  Mutual  Savings  Bunk  and  (opinion  of  Strong,  J..  467). 

Building  Association  r.  Wilcox,  24  3  Jarrett  r.  Cope,  68  Pa.  St.  67. 

Conn.  147.     Similar  provisions  ap-  *  Kupfert  v.  Guttenberg  Building 

ponr  also  in   the  statutes  of  other  and  Savings  Association,  30  Pa.  St. 

See  nnte.  ch.  ii.  465. 

*  See   North    America    Building  s  Parker  v.  The  Fulton  Loan  and 


362  THE    LAW   OF   BUILDING    ASSOCIATIONS.        [CH.   VII. 

regulations '    made  by  them,  illegal  and  void,  where  their 
operation  was  such  as  to  defeat  that  purpose. 

§  119.  As  a  mere  savings  institution,  the  building  : 
ciation  would  never  have  recommended  itself  to  the  favor  of 
Legislatures  to  so  unprecedented  a  degree.*  As  a  mere  bank 
for  the  depositing  of  money  lying  idle,  for  the  purpose  of 
fructifying  it,  for  the  rich,  by  fleecing  the  needy,  it  would 
never  have  acquired  the  unusual  rights  it  exercises.  But  the 
idea,  the  possibility,  of  making  membership  in  it  the  muans 
of  raising  a  property-holding,  homestead-owning  class  of  citi- 
zens, precisely  among  those  whose  improvident  habits  and 
petty  earnings  had  hitherto  debarred  them  from  the  blessing, 
or  feeling  the  stimulus  of  the  prospect,  of  owning  their  own 
homes;  the  desirableness  of  augmenting  the  proportion  of 
land-owners  among  the  working  classes,  particularly  in  a 
republic,  seemed  so  weighty  a  consideration  in  the  minds  of 
legislators,  that  they  were  willing,  in  exchange,  to  make  a 
sweeping  exception  to  many  of  the  best-settled  rules  of  gen- 
eral policy  applicable  to  dealings  between  man  and  man. 
But  "  the  person,  whether  natural  or  artificial,  to  whom  a 
privilege  is  granted,  is  bound,  upon  accepting  it,  to  render  to 
the  public  that  service  the  performance  of  which  was  the 
inducement  of  the  grant ;  and  it  is  because  of  such  obligation 
to  render  service  to  the  public  that  the  Legislature  has  power 
to  make  the  grant." ' 

§  120.  If  a  building  association  invest  its  money  in  the  pur- 
chase of  real  estate  (looking  forward  to  an  increase  in  its 
value  for  the  realization  of  a  great  gain),  to  the  exclusion  of  a 
member  who  desires  the  whole  or  a  portion  of  that  money,  to 
enable  him  to  acquire  and  improve  real  estate  of  his  own, 
and  who  offers  acceptable  security  for  the  loan ;  it  is  doing 
precisely  what  it  was  not  created  for.  It  is  tying  up  money, 

Building  Association,  46  Ga.  166;  Association  et  al.,  2  Cold.  (Tenn.) 
Mills  et  al.  r>.  Salisbury  Building  418;  Herbert  et  al.  e.  Kenton  Build- 
and  Loan  Association,  75  N.  C.  292;  ing,  etc.,  Association,  supra. 
Latham  and  wife  v.  Washington  *  See  Wrigley,  The  Working- 
Building  and  Loan  Association,  77  man's  Way  to  Wealth,  (a  Treatise  on 
Id.  145;  Herbert  et  al.  v.  Kenton  Building  Associations,)  pp.  10,  seqq. 
Building  and  Savings  Association  'Gordon,  etc.,  v.  Winchester 
of  Covington,  11  Bush  (Ky.)  296.  Building  and  Accumulating  Fund 
1  Xartin  v.  Nashville  Building  Association,  12  Bush,  (Ivy.)  110. 


§  122.]  BIGHTS   OF   MEMBERS.  163 

whilst  its  business  is  to  let  it  circulate ;  it  is  making  large 
gains  which  enrich  the  wealthy,  who  can  afford  to  wait,  and 
benefit  little  to  the  poor  who  stand  in  need  of  immediate 
accommodation ;  it  is  incurring  great  hazards,  when  its  busi- 
ness is  intended  to  be  conducted  on  slight  risk  and  moderate 
profits;  it  is  denying  its  assistance  to  those  for  whose  ad- 
vancement it  was  endowed  with  liberal  powers ;  it  is  making 
membership,  with  its  continual  payments,  an  oppression  to 
those  to  whom  it  was  intended  to  be  a  blessing — denying 
them  what  it  was  meant  to  ensure,  and  forcing  upon  them  a 
policy,  and  drawing  them  into  speculations,  inconsistent  with 
their  necessities  and  resources ;  and  it  is  defrauding  the  State, 
from  whom  it  holds  its  franchises  for  a  specific  end,  whilst 
adopting  the  very  course  by  which  that  end  will  most  effectu- 
ally be  defeated  of  its  accomplishment. 

§  121.  Where  there  are  no  members  desiring  to  borrow 
the  association's  money,  its  investment  in  real  estate,  or  any 
other  enterprise,  may  or  may  not  be  proper,  according  to  the 
powers  granted  it.  But  where  the  question  is  between  a 
member  who  desires  a  loan,  and  whose  standing  and  proposed 
securities  are  unexceptionable  after  the  standard  adopted  by 
the  association,  and  a  possible  investment  of  the  funds  in  real 
estate,  or  by  way  of  loan  to  a  stranger,  it  is  clear,  upon  prin- 
ciple, that  the  member  should  have  the  preference,  and  is  en- 
titled to  enforce  the  same  against  the  officers  of  the  society, 
who,  in  their  turn,  must,  if  need  be,  be  enjoined  from  any 
proposed  action  looking  towards  a  depletion  of  the  treasury 
by  such  outside  loans  and  investments,  whilst  individual  mem- 
bers, desiring  to  take  loans,  and  entitled  so  to  do,  would  be 
prejudiced  (in  a  manner  and  to  an  extent  necessarily  incapable 
of  adequate  compensation  at  law)  by  such  action. 

Highest  Bidder  to  Receive  Loan.     "Minimum  Premiums." 

§  122.  It  is  equally  manifest,  that,  where  the  statute  or 
charter  directs  the  granting  of  the  loan  to  the  highest  bidder, 
the  person  who,  upon  a  fair  competition,  occupies  that  posi- 
tion, is,  if  he  can  substantiate  his  claim  to  the  loan  by  offering 
the  proper  security,  absolutely  entitled  to  receive  it.  If  the 
direction  is  contained  in  the  statute  under  which  the  building 
association  is  organized,  such  right  resides  in  every  member, 
notwithstanding  a  provision  in  the  charter  or  by-laws  intended 


164  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  VII. 

to  modify  it  by  fixing  a  minimum  premium,  below  which  no- 
bids  will  be  accepted.  In  such  case,  the  rule  which  estab- 
lished the  so-called  "  fixed  premium"  has  no  validity  what- 
ever,1 and  its  operation,  to  the  injury  of  a  borrower,  may 
by  him  be  act  up  as  a  defence,  pro  tanto,  against  the  enforce- 
ment of  his  debt  to  the  association.9  But  it  must  appear  that 
he  was  really  prejudiced  by  the  operation  of  the  illegal  rule.* 
Therefore,  if  the  premium  was  run  up,  even  to  an  extrava- 
gant figure,  by  mere  competition,  free  and  unfettered,  he  has 
nothing  to  complain  of  with  regard  to  the  rule ;  for  it  has 
in  no  wise  affected  him,  and  he  can  base  no  claims  to  defal- 
cation upon  the  ground  of  a  wrong  done  to  him  by  reason 
of  it. 

Right  to  claim  Loan  Depends  upon  Ability  to  Furnish  Security. 

§  123.  Again,  his  right  to  receive  the  loan  by  virtue  of 
being  the  highest  bidder,  depends  upon  his  ability  to  furnish 
the  requisite  security.  What  security  may  be  demanded  by 
a  society,  for  the  loans  which  it  grants  to  its  members,  (un- 
less specifically  prescribed  by  statute  or  charter),  is  within 
the  proper  discretion  of  the  society  and  its  directors ;  with- 
out conceding  to  them,  however,  the  right  to  discriminate 
arbitrarily  between  members,  imposing  upon  any  particular 
one  more  severe  conditions,  in  the  absence  of  substantial  rea- 
sons therefor,  than  are  established  in  the  generality  of  cases. 
Usually,  the  security  exacted  by  building  associations  is  that 
of  mortgage  or  judgment,  accompanied  with  an  assignment  of 
the  borrower's  stock  in  the  association.  But  the  latter  is  ordi- 
narily under  no  obligation  to  take  this  security,  to  the  exclu- 
sion of  any  yther,  and  no  sort  of  equities  arise  against  it  by 
reason  of  its  deviation  from  what  may  be  the  usual  course.4 
Gross  negligence  in  the  officers  would,  of  course,  subject  them 
to  personal  liability  in  case  of  loss. 

1  State  v.  Greenville  Building  As-  Fund    and    Loan    Association    «. 

sociation,  29  Ohio  St.  92;  State  v.  Young,  9  W.  N.  C.  (Pa.)  251. 

The  Oberlin  Building  and  Loan  As-  4  Union  Building  Loan   Associa- 

sociation,  35  Ohio  St.  258;  Stiles's  tion  of  New  Brunswick  t>.  The  Ma- 

App.,  9  "W.  N.  C.  (Pa.)  83,  and  see  sonic    Hall    Association    et  al.,    2 

post,  £§  394-397.  Stewart  (N.  J.),  389;  and  see  post, 

*  Stiles's  App.  supra.  g§  380-381. 

*  Orangeville     Mutual     Savings 


•§  126.]  RIGHTS   OF   MEMBERS.  1C5 

Member  Cannot  Maintain  Assumpsit  for  Promised  Loan. 

§  12-i.  Where  a  member  has  become  entitled  to  receive  a 
loan,  and  been  promised  such  accommodation  by  the  society, 
he  cannot,  if  subsequently  refused  the  money,  even  after  his 
mortgage  has,  by  the  building  association's  attorney,  without 
its  consent,  been  placed  upon  record,  recover  the  sum  agreed 
upon  in  an  action  of  assurnpsit,  though  he  might  have  an 
action  on  the  case  for  breach  of  contract.1 

Society  need  not  Inquire  into  Purpose  or  Application  of  Loan. 

§  125.  Under  the  statutory  provision  referred  to,  and  sub- 
ject to  the  proper  discretion  of  the  directors  as  to  security,  the 
highest  bidder  is  entitled  to  receive  the  loan  irrespectively  of 
the  purpose  to  which  he  proposes  to  devote  the  money.8 
This  doctrine  follows,  as  a  necessary  consequence,  from  the 
duty  of  the  association  to  give  its  money  to  the  highest  bid- 
der, and  the  impracticability,  in  most  cases,  if  deception  is 
intended  to  be  practised,  to  supervise  and  control  the  applica- 
tion of  the  money  received  by  the  borrower,  in  the  absence 
of  direct  statutory  mandate  to  that  effect. 

Proportion  of  Loan  Grantable,  to  Applicant's  Stock-Interest. 

§  126.  The  proportion  which  the  loans  grantable  to  any 
member  shall  bear  to  the  amount  of  stock  he  holds,  is  usually 
regulated  by  law.  As  a  general  rule,  it  may  be  assumed,  that 
he  is  entitled  to  receive,  by  way  of  loan  or  advancement,  an 
amount  equal  to  the  par  value  of  the  shares  he  holds,  less  the 
premium.  Beyond  this  he  cannot  claim,  nor  the  society 
grant,  any  amount  by  way  of  loan  or  advancement,  without 
the  support  of  some  statutory,  charter,  or  by-law  provision, 
giving  him  the  right  and  the  society  the  power.  Sweeping 

1  Conway  «.  The  Log  Cabin  Per-  (Pa.)    18;    Becket   «.     Uniontown 

manent  Building  Association  of  Bal-  Building  Association,  7  Norris  (88 

timore  City,  52  Md.   137;  and  see  Pa.  St.),  211;  Relief,  etc.,  Associa- 

post,  §§  264-268.  tion  v.  Longshore,  8  Luz.  Leg.  Reg. 

9  Juniata  Building  and  Loan  As-  (Pa.)  199.  It  has  been  long  recog- 
sociation  v.  Mixell,  84  Pa.  St.  313;  nized  in  England  that  building  as- 
Hagerman,  et  al.  ».  The  Ohio  Build-  sociations  need  not  look  to  the  ap- 
ing and  Savings  Association,  25  plication  of  money  loaned  to  mem- 
Ohio  St.  186;  and  see  Manufac-  bers.  Cutbill  a.  Kingdom,  1  Exch. 
turers'  and  Mechanics'  Sav.  and  494,  17  L.  J.  Exch.  177. 
Loan  Co.  v.  Conover,  5  Phila. 


166  THE  LAW  OF  BUILDING   ASSOCIATIONS.        [CH.  VII, 

discretion  is  sometimes  vested  in  the  directors  in  such  cases 
by  statute  and  by-law.  But  even  when  this  is  not  the  case, 
they  would  probably  be  authorized  to  concede  a  loan  to  a 
member  beyond  the  figure  of  the  par  value  of  his  stock,  pro- 
vided they  may  lend  money  to  strangers.1  From  such  they 
have  the  right  to  take  any  kind  of  security,  they,  in  the 
proper  exercise  of  their  discretion,  may  deem  sufficient.* 
They  need  not  require  an  assignment  of  stock  as  collateral, 
equal  to  the  amount  of  the  loan,  or  any  assignment  of  stock 
at  all.'  Why,  then,  should  a  member  necessarily  be  in  a 
worse  position,  as  to  the  possibility  of  accommodation  out  of 
the  society's  funds,  than  a  mere  stranger,  so  long  as  he  can 
give  acceptable  security  ? 4  The  right  to  grant,  in  such  case, 
unless  there  be  some  binding  restriction  somewhere,  is  cer- 
tainly vested  in  the  directors ;  but  the  right  to  demand  does 
not  reside  in  the  member,  except  by  virtue  of,  and  in  the 
manner  prescribed  by  the  provision  of  the  by-laws  of  the 
society. 

Right  of  Withdrawal :  its  Foundation,  Nature,  and  Extent. 

§  127.  The  privilege  to  withdraw,  at  any  time  before  the 
society's  expiration,  without  being  subject  to  a  forfeiture  of 
the  money  already  paid  in,  is  one  of  the  most  valuable  of  an 
investing  member's  rights.  It  is  true  that  his  connection 
with  the  association  is  essentially  that  of  one  of  a  partnership 
for  a  definite  period  of  time,  entitled,  upon  its  expiration,  to 
reap  the  harvest  of  his  investments  in  the  enterprise.  In 
becoming  a  member  of  the  association,  he  does  so,  ostensibly, 
at  least,  with  the  purpose  of  remaining  in  it  to  the  end,  bear- 
ing his  part  of  all  its  burdens,  and  finally  sharing  all  its  prof- 
its in  the  same  proportion.  His  failure  to  continue  in  the 
concern,  therefore,  is  essentially  in  the  nature  of  a  breach  of 
contract,  upon  which  the  loss  of  his  previous  contribution 
might,  not  unreasonably,  be  held  to  follow.  But  circum- 
stances, unforeseen  at  the  time  of  his  assumption  of  member- 

1  See  Cutbill  «.  Kingdom,  1  Exch.         «  Union  Building  and  Loan  As- 

494;  17  L.   J.   Exch.   177;  Union  sociation  t?.  The  Masonic  Hall  As- 

Building  and  Loan  Association  v.  sociation,  supra. 
The  Masonic  Hall  Association,   2        3  Ib. 
Stewart  (N.  J.),  389.  4  See  Cutbill «.  Kingdom,  supra. 


§  128.]  RIGHTS   OF  MEMBERS.  167 

ship,  may,  without  any  wrong  on  his  part,  make  a  severance 
of  his  connection  with  the  association  desirable,  imperative. 
A  prudent  person  may  be  supposed  to  take  such  a  contingency 
into  consideration  when  about  to  join  the  society.  If  now, 
upon  entering,  he  had  the  alternative  only  of  sticking  to  it 
till  to  its  close,  or  losing  what  he  has  paid  in,  or  even  all  in- 
terest upon  what  he  has  paid  in,  the  prospect  would  deter 
many  who  would  make  good  and  conscientious  members,  but 
who  could  not  fail  to  remember,  that,  through  some  one  of  the 
numerous  contingencies  to  which  men  are  liable,  the  pay- 
ments incident  to  membership  might,  some  day,  become  too 
heavy  a  burden  for  them  to  carry ;  or  that,  by  reason  of  re- 
moval from  the  seat  of  the  corporation,  their  keeping  up 
might  be  rendered  impracticable.  A  provision,  as  politic  in 
the  interests  of  the  building  association,  as  just  and  reassuring 
to  its  members,  is,  therefore,  made  an  integral  part  of  the 
scheme,  viz. :  that  a  member  desiring  to  withdraw  shall  be 
allowed  to  do  so,  upon  proper  notice  given  to  the  association, 
of  his  intention,  and  with  the  privilege  of  receiving  from  it 
what  he  has  paid  in  by  way  of  subscription  (after  deduction 
of  all  fines  and  charges  against  him,  and  of  his  proportion- 
ate share  of  the  expenses  of  the  enterprise,  to  the  date  of 
his  withdrawal),  together  with  such  share  of  the  profits  of 
the  association  as  may  appear  just  and  warranted  by  its 
business. 

Right  to  Withdraw  does  not  Involve  Right  to  Account  of  Profits. 

§  128.  It  must  be  well  understood  that  such  a  business 
does  not  give  the  withdrawing  members  the  right  to  ask  an  ac- 
count of  his  payments  into,  and  of  the  profits  made  thereon 
by,  the  association.  No  such  liability  can  be  recognized  on 
its  part.  Its  contract  with  the  members  never  was  to  hold 
his  deposits,  like  a  bank,  subject  to  his  call,  and  at  the  same 
time,  like  a  factor,  to  be  accountable  to  him,  at  any  moment, 
for  the  gains  made  by  the  turning  over  of  these  deposits.  It 
is  a  business  venture,  staked  upon  the  achievement  of  ;i 
tain  object,  possibly  within  a  certain  space  of  time.  When 
that  object  is  accomplished,  or  that  limit  of  time  exhausted,  the 
contract  between  the  member  and  the  association  calls  for  an 
account  at  the  hands  of  the  latter.  Previously  to  the  happen- 


168  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [cH.  VII. 

ing  of  that  contingency,  there  is  no  such  liability  resting  upon 
it.    Nor,  in  the  nature  of  things,  could  it  reasonably  be  implied. 
§  129.  The  whole  business  and  operation  of  a  building  as- 
sociation is  based  upon  the  idea  that,  as  to  the  contributor,  it 
stands  in  a  trust  relation  in  respect  of  the  funds  contributed. 
It  receives  them  and  administers  them,  and  finally  accounts 
for  them  to  the  contributor,  and  for  the  profits  made  by  their 
investment,   and   the   losses   and  expenses   incident  thereto 
throughout  the  whole  period  of  its  running.     Whatever  may 
be  thought  of  the  policy  of  thus  putting  one's  funds  out  of 
his  own  control,  and  into  the  hands  of  agents  and  trustees  for 
management  and  investment,  during  a  long  number  of  years, 
this  is,  nevertheless,  precisely  what  is  done.1     It  is,  more- 
over, what  is  contemplated  at  the  outset.     The  association  is 
to  run  until  the  shares  are  worth  a  certain  amount,  subject  to 
the  limit  imposed  by  statute  or  charter  upon  the  length  of 
time  allowed  for  the  attainment  of  this  result,  or  the  duration 
of  the  company.    As  soon  as  this  happens,  the  society  becomes 
liable  to  account  to  the  members ;  for  then  their  mutual  deal- 
ings cease,  and  an  adjustment  becomes  necessary.     In   the 
mean  time,  the  stockholder  has  agreed  to  continue  his  pay- 
ments upon  his  shares,  and  his  money  goes  into  the  general 
fund,  and  is  administered  and  managed  by  the  association,  for 
his  own  advantage  and  that  of  his  fellows.     It  would  be  a 
matter  of  great  difficulty,  at  any  stage  intervening  between 
the  commencement  of  the  society  and  its  winding-up,  to  give 
an  exact  account  of  what  has  been  done  with  any  particu- 
lar shareholder's  contributions,  or  even  generally  with  their 
equivalent,  without  pretending  to  trace  its  source ;  to  tell  how 
much  has  been  realized  upon  them  in  the  way  of  profits ;  how 
much  of  them  has  been  spent  to  answer  the  necessities  of  the 
management ;  how  much  of  them  has  been  lost  by  misfor- 
tunes and  accidents  of  every  kind,  to  which  investors  of 
money  are  exposed.     It  is  a  difficulty  which  amounts  to  a 
practical  impossibility.*     The  present  value  of  the  stock  de- 

1  Citizens'  Mutual  Loan  and  Ac-  Building  and  Loan  Association  of 

cumulating  Fund  Association  v.  Hyde  Park,  38  Leg  Int.  (Pa.)  333: 

Webster,  25  Barb.  (N.  Y.)  264.  11  W.  N.  C.  414;  97  Pa.  St.  514. 

8  Watkins  v.  The  "Workingmen's 


§  129.]  BIGHTS   OF   MEMBERS.  169 

pends  upon  the  length  of  time  during  which  payments  upon 
it  will  have  to  be  made,  in  order  to  raise  it  to  the  required 
figure.  The  shorter  that  period,  the  greater  its  present  worth. 
Much  of  the  property  of  a  building  association  consists  of  se- 
curities of  various  kinds,  taken,  as  is  usual,  to  cover  a  far 
greater  proportion  of  the  value  of  the  real  estate  upon  which 
they  are  liens,  than  would  be  allowed  by  individuals  or  cor- 
porations prohibited  from  recovering  usurious  interest.  How 
much  will  be  realized  from  these  securities  it  is  beyond  hu- 
man foresight  to  tell.  Much,  too,  of  the  property  consists  of 
real  estate,  purchased  to  save  debts  secured  upon  it,  or,  where 
that  is  legally  within  the  association's  powers,  for  purposes  of 
investment.  What  these  assets  may  be  worth  upon  the  ter- 
mination of  the  enterprise,  or  within  the  next  few  years,  con- 
sidering the  rises  and  falls  in  the  real  estate  market,  is  again 
a  thing  which  no  man  can  find  out.  It  is  by  waiting  and 
taking  advantage  of  the  opportunities  of  the  moment  that 
they  are  made  paying  to  the  association,  and  whether  that 
moment  shall  arrive  sooner  or  later,  or  not  at  all  within  the 
society's  corporate  life,  cannot  be  foretold.  Yet  another  im- 
portant factor  in  estimating  the  probable  value  of  the  stock 
upon  dissolution,  would  have  to  be  the  relative  and  always 
fluctuating  proportion  between  borrowing  and  investing 
members  (upon  the  frequency  of  the  former  of  which  largely 
depends  the  prosperity  of  the  society),  and  the  extent  of  the 
premium  which  borrowers  may,  from  time  to  time,  be  found 
willing  to  concede, — a  matter  wholly  controlled  by  the  money 
markets  of  the  country,  and  the  prevailing  rates  of  interest 
among  men.  The  incalculable  items  of  expenses  in  litiga- 
tion, which  may  or  may  not  become  necessary  in  collecting 
debts  owing  the  society,  of  the  promptness  or  tardiness  of 
contributing  members,  and  innumerable  minor  considerations, 
all  directly  tending  either  to  augment  or  decrease  the  chanct- 
of  a  speedy,  profitable  winding-up,  must  be  taken  into  the  ac- 
count. All  of  them  unite  in  making  anything  like  an  ap- 
proximation of  the  present  value  of  any  one  share,  upon  any 
given  day, — having  due  regard  to  the  fact  that  here  is  an  en- 
terprise whose  character  is  to  be  judged  of  as  a  whole,  and  in 
which  no  one  person  concerned  shall  have  an  advantage  over 


170  THE  LAW   OF  BUILDING  ASSOCIATIONS.        [CH.  VII. 

any  other, — an  absolute  impossibility.     Nor  can  the  associa- 
tion be  called  upon  to  perform  such  an  impossibility.1 

Amount  Withdrawable  by  any  Member. 

§  130.  Where,  as  formerly  in  Connecticut,  the  shares  of 
a  building  association  are  a  regular  feature  in  the  stock  mar- 
ket, and  have  an  ascertainable  value  by  reason  of  that  fact,  the 
difficulty  in  doing  exact  justice  to  a  withdrawing  member 
is  very  readily  removable.*  Where,  however,  that  is  not  the 
case,  the  most  satisfactory  expedient  is  that  of  allowing  him 
to  take  out  what  he  has  paid  in,  less  fines  and  other  charges 
still  owing  from  him,  and  a  proportionate  share  of  the  expenses 
of  the  business  to  date,  and  add  to  it  such  a  sum,  as  his  share  of 
the  common  profit,  as  may  be  deemed  proper  by  the  society. 

Statutory  Terms  of  WithdrawaL 

§  131.  In  order  to  put  this  right  upon  a  firm  basis,  and  to 
secure  members  against  any  kind  of  unfairness  or  oppression, 
to  which,  at  the  hands  of  the  building  association,  they  might 
become  exposed,  it  is  usually  established  and  defined  in  the 
statutes  governing  the  incorporation  of  such  societies.  The 
right  of  withdrawal  is  conceded  to  every  unadvanced  mem- 
ber, upon  certain  notice  given  to  the  society  of  his  intention 
to  withdraw.  The  proportion  of  the  profits  he  may  claim  is 
usually  left  to  the  discretion  of  the  association,3  with  the 
provision  sometimes  added,  that  members  who  have  been 
such  for  less  than  one  year,  shall  not  be  entitled  to  any 
profits,  unless  by  the  grace  of  the  association,  and  that  only 
a  certain  proportion  of  its  funds  shall,  at  any  one  time,  be 
applied  in  satisfying  withdrawings  members.  • 

Charter  and  By-Law  Provisions  as  to  Withdrawal,  Inconsistent  with 
Statute,  Void. 

§  132.  Where  these  details  are  prescribed  by  the  statute, 
no  charter  or  by-law  provisions  can  vary  them  to  the  preju- 

1  See  post,  §§  455-457.  share  of  profits  as  the  directors  may 

*  See  Babcock  v.  The  Middlesex  determine,  they  must  allow  some. 
Savings  Bank  and  Building  Associa-  Fleming  v.  Self,  18  J.  P.  296;  23  L. 
tion,  28  Conn.  302.    Even  in  such  T.  Rep.  63;  Kay,  518;  S.  C.,  upon 
case  the  withdrawing    member  is  appeal,  3  Eq.  Rep.  14;  24  L  T.  Rep. 
liable  to  his  share  of  losses  and  ex-  101;  18  J.  P.  772;  24  L.  J.r  Ch.  29; 
penses  incurred.  1  Jur.,  N.  S.  25;  3  W.  R.  89;  3  De 

*  Where  the  statute  or  rules  give  G.,  M.  &  Q.  987. 
the  right  to  withdraw,  with  such 


§  133.J  RIGHTS   OF   MEMBERS.  171 

dice  of  withdrawing  members ;  and  where  the  charter  speci- 
fies them,  any  by-law  inconsistent  therewith  is,  of  course, 
void.  It  is,  however,  in  such  case,  necessary,  that  the  person 
desiring  to  withdraw  with  the  benefits  ordained  by  the  stat- 
ute, put  himself  into  the  proper  position  •  by  complying 
strictly  with  the  requirements  and  formalities  called  for  by 
the  same,  and  also  with  all  regulations  made  by  the  society 
not  inconsistent  with  it.1  As  soon  as  he  has  done  so,  his 
rights  against  the  association  are  perfected,  no  matter  what 
may  be  the  provisions  of  its  own  rules.  Thus,  where  the 
statute  gives  the  right  to  withdraw  with  certain  benefits,  after 
the  expiration  of  the  first  year  of  membership,  upon  thirty 
days'  notice  to  the  society ;  whilst  the  charter  of  the  associa- 
tion provides  that  "  members  may  withdraw  only  on  good 
and  sufficient  cause  shown,  to  be  judged  of  by  the  Board  of 
Directors ;"  a  person  who  has  complied  with  the  requirements 
of  the  statute  alone  is  held  entitled  to  its  full  benefit,  and 
the  charter  provision,  inconsistent  with  it,  is  utterly  void.2 
Equally  inoperative,  under  the  same  statute,  is  a  by-law 
assuming  to  compel  withdrawing  members  to  compete  for 
the  priority  of  payment  of  their  claims.3  And  the  law  gov- 
erning in  such  case  is  that  in  force  at  the  time  the  charter 
was  granted,  and  under  which  it  was  granted/ 

Terms  of  Withdrawal,  Deviating  from  Prescribed  Rule,  may  become 
Binding  on  Society. 

§  133.  Where,  however,  the  operation  of  the  variance 
between  the  rule  adopted  by  the  society,  and  the  provision 
of  the  statute,  is  in  favor  of  the  member,  and,  upon  the 
whole,  adverse  to  the  society's  interests,  in  strictness  it  may 
be  equally  ultra  vires  /  yet  this  plea  cannot  be  set  up  by  the 
society  when  it  has  derived  benefit,  even  if  only  of  a  tem- 
porary kind,  from  the  member  acting  under  it,  or  has  placed 
him  in  such  a  position  in  consequence  of  his  relying  upon 
the  rule,  that  he  would  be  injured  by  its  abrogation.'  This 

ings  Fund  and  Building  Associa- 

'  See  post,  §§  133-185.  tion,  7  W.  N.  C.  (Pa.)  95. 

9  See    Rhoads    v.    Hoernerstown         4  Miller  v.  Jefferson  Building  As- 
Building  and  Savings  Association,      social  ion,  50  Pa.  St.  32. 
82  Pa.  St.  180  (185).  5  Eyre   r>.   Building   Association, 

3  Rogers  v.  S.  W.  Mutual  Sav-     17  Leg.  Int.  (Pa.)  148;  Miller  p.  Jef- 


172  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  VIL 

doctrine  rests  upon  the  ground  of  equitable  estoppel,  whereby 
no  party  may  be  suffered  to  induce  another  to  change  his 
condition,  and  then  prejudice  him  by  conduct  inconsistent 
with  the  prospects  held  out  to  him.  Nor,  on  the  other  hand, 
is  the  party  benefited,  that  is,  the  member,  a  proper  one  to 
raise  objection  to  the  validity  of  the  arrangement.1  And 
though  he  repudiate  it,  he  is,  where  it  has  been  partly  carried 
out,  entitled  to  its  benefits.11 

Regulation  of  Withdrawals  by  Charter  or  By-Laws.     Construction. 

§  134.  In  the  absence  of  any  statutory  provision  upon  the 
subject,  the  matter  of  the  terms  of  withdrawal  is  open  to 
regulation,  either  by  charter  and  by-laws  passed  in  accordance 
therewith,  or  by  by-laws  alone.  Whatever  regulations  may 
then  be  adopted  and  conditions  imposed  by  the  society,  so 
long  as  they  are  not  contrary  to  the  spirit  of  the  charter,  to 
the  laws  of  the  State  and  of  the  Union,  will  be  binding  upon 
all  parties.  If,  however,  they  are  not  explicit,  or  admit  of 
several  interpretations,  the  leaning  of  the  court  is,  to  favor 
the  member  as  against  the  building  association,  and  to  give 
to  his  liberty  the  benefit  of  any  doubt.  Thus,  the  by-laws  of 
an  association  provided  that  "  in  case  any  member,  by  reason 
of  sickness,  removal,  or  through  misfortune,  is  unable  to  con- 
tinue the  payment  of  his  subscription,  he  may  give  notice  to 
the  secretary  of  an  intention  to  withdraw  from  the  associa- 
tion, and  in  case  the  directors  are  satisfied  as  to  the  grounds 
of  withdrawal,  his  whole  amount  of  subscription  shall  be  re- 
turned, except  the  entrance  fee;"8  and  that  "any  person 
wishing  to  withdraw  for  the  above  reasons,  or  otherwise," 
and  who  shall  have  been  a  member  for  a  certain  length  of 
time,  "and  be  clear  of  the  books,"  shall  be  entitled  to  certain 
interest  on  that  amount.  It  was  held  that  any  person  having 

ferson  Building  Association,  50  Pa.  8  Entrance  fees  in  building  asso- 

St.  32;  Archer  c.  Harrison,  7DeG.,  ciations  are  properly  applicable  to 

Mac.  &  G.  404;  3  Jur.,  N.  S.  194;  the  discharge  of  the  ordinary  ex- 

and  see  post,  §  323.  penses  of  the  association,  and  are 

1  See    Hoboken   Building   Asso-  not  to  be  considered  a  deposit  or 
ciation   v.  Martin,  2   Beas.  (N.  J.)  payment  for  which  the  member  may 
428.  subsequently  claim  credit,  under  any 

2  See  Ibid. ;  but  also,  post,  §§  171,  circumstances.     Barker  v.  Bigelow, 
172.  15  Gray  (Mass.),  180. 


§  135.]  RIGHTS   OF   MEMBERS.  173 

been  a  member  for  the  period  of  time  specified,  and  being 
"  clear  of  the  books,"  might  withdraw  without  leave  of  the 
directors,  and  was  entitled  to  the  bt'Mcfits  set  forth  in  the  by- 
laws.1 The  requirement  of  the  directors'  approval  applied 
only  to  those  who  wished  to  withdraw  for  the  reasons  given 
in  the  by-laws,  and  who  had  not  been  members  for  the  speci- 
fied time. 

Officers  Cannot  Exercise  Discretion  in  Approving  Withdrawals  Arbi- 
trarily. 

§  135.  Nor  have  the  officers,  vested  with  such  power  of 
approval  by  the  rules  of  the  society,  the  right  to  exercise  it 
capriciously,  unreasonably,  or  oppressively.  The  rules  of  a 
building  association  provided,  that,  if  any  member,  by  reason 
of  sickness,  removal  from  the  city,  or  misfortune,  were  unable 
to  continue  his  subscriptions,  he  should  give  notice  of  his  in- 
tention to  withdraw ;  and  in  case  the  Board  of  Trustees  were 
satisfied  as  to  the  grounds  of  withdrawal,  the  whole  amount 
of  subscriptions  paid  in  by  the  member  should  be  returned  to 
him.  A  member  gave  notice,  in  due  form,  of  his  intention 
to  withdraw,  on  the  ground  that  he  was  "  no  longer  able  to 
continue  the  payment  of  his  subscriptions  to  the  association, 
owing  to  various  misfortunes,  losses  in  business,  sickness  in 
his  family,  and  the  rigor  of  the  times."  The  approval  of  the 
trustees  being  withheld,  suit  was  brought  by  the  member 
against  the  society.  It  was  held  that  he  must  be  permitted 
to  prove  the  truth  of  his  alleged  grounds  of  withdrawal, 
which  were  set  forth  in  his  complaint  and  denied  in  the 
building  association's  answer;  and  that,  if  he  proved,  upon 
these  grounds,  his  total  inability  to  continue  his  subscription, 
and  that  there  was  nothing  in  the  pecuniary  circumstances  or 
condition  of  the  building  association  furnishing  any  reason 
why  the  money  paid  into  it  should  not  be  returned,  he  might 
recover  it  back,  although  the  Board  of  Trustees  may  n<>t 
have  declared  themselves  satisfied  as  to  the  grounds  of  his- 
withdrawal.  This  approval,  it  was  said,  could  not,  under  any 
and  all  circumstances,  be  an  indispensable  condition  to  a  mem- 
ber's right  to  withdraw  and  receive  back  his  money ;  or.  rather, 

1  Fuller  v.  Salem  and  Danvers  Loan  and  Fund  Association,  10  Gray 
(Mass.),  94. 


174  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.   VI 1. 

the  trustees  had  not  the  right  to  withhold  their  consent  arbi- 
trarily, when  no  ground  existed,  or  could  be  suggested,  for 
their  so  doing.1 

Withdrawing  Member  Becomes  Mere  Creditor  of  Society. 

§  136.  As  soon  as  a  member  has  perfected  his  right,  as  a 
withdrawing  stockholder,  against  the  association,  by  giving 
the  proper  notice  of  his  intention,  for  the  specified  time,  and 
conforming  with  all  other  lawful  requirements  in  the  premises, 
he  ceases,  eo  instanti,  to  be  a  member  of  the  association,*  and 
assumes  the  exclusive  character  of  creditor  towards  it,  to  the 
amount  he  may  be  entitled  to  receive  under  the  rules  and 
statutes.  He  has  no  longer  the  right  to  exercise  any  of  the 
privileges  of  membership.  Nor  can  he  transfer  his  stock,  for 
the  act  of  withdrawal  is  the  yielding  up  of  the  stock  of  the 
withdrawing  holder  to  the  society,  it  paying  him,  or  becoming 
liable  to  pay  him,  its  constitutionally  ascertained  value.  But 
he  is  at  liberty,  before  being  fully  paid  by  the  association,  to 
assign  and  transfer  the  balances  due  him  from  it,*  to  a  mem- 
ber of  the  association,  as  well  as  to  any  other  person.4 

Withdrawing   Member   may  Proceed  to  Judgment   against   Society 
for  Amount  Due  Him. 

§  137.  In  his  capacity  as  creditor,  the  retiring  member, 
having  thus  perfected  his  rights  against  the  association,  may 
enforce  them  by  an  action  at  law/  in  which  the  society  is 
made  defendant,  and  there  is  no  plea  under  which  it  can  pre- 
vent the  entry  of  judgment  against  it  for  what  the  claimant 
may,  upon  trial,  be  shown  to  be  entitled  to  receive  at  its 
hands.'  The  same  right  belongs  to  the  retiring  member's 

1  Wetterwulgh  v.   The  Knicker-  6  O'Rourke  v.  West  Pennsylvania 

bocker  Building  Association,  2  Bos.  Loan  and  Building  Association,  8 

(N.  Y.)  381.  W.  N.  C.  (Pa.)  176;  93  Pa.  St.  308; 

8  A  member  is  not  bound  by  new  U.  S.  Building  and  Loan  Associa- 

rules  made  after  he  has  given  notice  tion  v.  Silverman,  85  Pa.  St.  394; 

of  his  intention  to  withdraw.     Ar-  Estate  National  Savings,  Loan  and 

milage  ».  Walker,  2  Jur.,  N.  S.  13;  Building  Association,  9  W.  JsT.  C. 

30  J.  P.  53;  26  L.  T.  Rep.  182;  2  (Pa.) 79;  Wetterwulgh  v.  The Knick- 

Kay  &  J.  211.                .  erbocker    Building    Association,    2 

8  See  Hennighausen  and  Wolff,  Bos.  (N.  Y.)  381. 

Rec're.  v.  Tisher,  50  Md.  583.  «  U.  S.  Building  and  Loan  Asso- 

4  See  Ibid.  ciation  v.  Silverman,  supra. 


§  138.]  BIGHTS   OF   MEMBERS.  175 

assignee  of  balances  due  upon  withdrawal,  even  though  the 
latter  be  a  member  of  the  association.1  But  an  averment  by 
the  building  association,  defendant,  of  losses  sustained  at  the 
time  of  the  withdrawal,  will  prevent  judgment  against  it  by 
the  withdrawing  member  until  the  amount  really  due  him 
has  been  ascertained.1 

Discretion  of  Courts  as  to  Execution  against  Society. 

§  138.  Judgment  being  obtained  against  the  building  as- 
sociation, it  does  not  necessarily  follow  that  execution  may. 
issue  at  once.  Indeed,  where  the  whole  subject  of  withdraw- 
als is  left  to  charter  or  by  law  regulation  ;  i.e.,  when  the 
absolute  right  to  withdraw  and  receive  certain  benefits,  imme- 
diately upon  a  certain  notice,  is  not  expressly  secured  by 
statutory  enactment ;  it  would  seem  that  the  claim  of  a  with- 
drawing member, — not  to  be  invested  with  rights  of  a 
creditor,  a  judgment  creditor  even, — but  to  force  the  society 
at  once  to  a  full  settlement  with  him,  may  be  modified,  to 
some  extent,  and  postponed,  by  reason  of  some  matter  or 
thing  contained  in  the  constitution  of  the  society  of  which  he 
was  a  member,  or  found  in  the  present  circumstances  of  the 
same,  making  it  inequitable  or  unjust  to  his  late  fellow-mem- 
bers, to  allow  them  to  be  unduly  embarrassed  by  immediate 
process.  Thus  in  a  case  already  referred  to,3  it  was  held  that 
a  recovery  might  take  place  upon  proof,  inter  alia,  "  that  there 
was  nothing  in  the  pecuniary  circumstances  of  the  building 
association  furnishing  any  reason  why  the  money  paid  should 
not  be  returned ;"  and  in  another,4  a  set-off,  by  members  of 
the  association  indebted  to  it,  of  balances  assigned  them,  by 
withdrawing  members,  against  claims  of  the  society,  wore 
allowed,  "  there  being  nothing  in  the  constitution  making  it 
inequitable,  with  due  regard  to  the  rights  of  others,  to  allow 
the  set-off."  It  is  by  virtue  of  his  past  association  with  the 
remaining  members,  and  the  participation  allowed  him,  by  the 
rules,  in  the  profits  of  their  money  as  well  as  his  own,  that 

1   Hennighausen       and      Wolff,  bocker  Building  Association,  2  Bos 

Rec'rs,  t>.  Tisher,  50  Md.  583.  (N.  Y.  Super.  Ct.)  381. 

*  Wittman  v.  Building  Associa-  4  Hennighnusen      and       Wolff, 
tion,  7  W.  N.  C.  (Pa.)  80.  Rec'rs,  c.  Tisher,  50  Md.  583. 

*  Wetterwulgh  c.  The  Knicker- 


176  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  VIL 

the  withdrawing  shareholder  receives  back  the  payments  he 
lias  made,  increased  by  a  certain  amount.  It  would  not  be 
right  to  suffer  him,  by  way  of  acknowledging  this  benefit, 
to  turn  upon  the  society  he  had  just  left,  under  circum- 
stances exonerating  it  from  the  charge  of  wilful  tardiness,  or 
of  wilfully  arranging  its  affairs  in  such  a  manner  as  to  make 
its  funds  unavailable  for  withdrawals,  and  when  the  incon- 
venience of  a  reasonable  delay  would  be  slight  to  him,  whiUt 
the  embarrassment  resulting  to  the  society  and  its  members 
from  an  instantaneous  collection,  by  judicial  process,  of  the 
debt,  which  it  has  nourished  and  strengthened,  and  which 
exists  against  it,  by  its  own  conscientiousness,  sense  of  jus- 
tice, and  good  management,  might  be  such  as  to  throw  the 
entire  business  into  disastrous  confusion.  There  appears  no 
reason  for  denying  the  right  to  proceed  to  judgment  against 
the  society,  to  a  member  who  lias  perfected  his  claim  against 
it  by  observing  ail  the  formalities  and  prerequisites  of 
withdrawal.  He  is  a  creditor,  just  as  well  as  any  other  per- 
son to  whom  the  building  association  owes  money,1  and  as 
such  is  entitled  to  every  security  for  his  claim  that  any  other 
creditor  might  obtain.  But  the  court  has  the  power,  and  the 
building  association  has  the  right  to  invoke  that  power,  of 
restraining  the  immediate  issuing  of  execution  against  the 
building  association  for  the  collection  of  the  judgment,  when 
proper  equities  are  shown  by  the  society,  in  order  to  give  it  a 
reasonable  time  to  make  up  the  money  without  undue  embar- 
rassment of  its  affairs.* 

Society  to  Keep  Funds  Available  for  Withdrawing  Members. 

§  139.  It  must  not,  however,  be  overlooked,  that  it  is  the 
duty  of  the  association,  whether  the  right  of  withdrawal  be 

1  U.  S.  Building  and  Loan  Associ-  Tisber,  supra;  U.  S.  Building  and 

ation  T?.  Silverman,  85  Pa.  St.,  394.  Loan  Association  -c.  Silvcrmnn,  su- 

9  Aside  from  the  natural  justice  pra,  which  see  post,  ££  141-143.  It 

of  this  view,  it  seems  to  be  ?uffl-  has  already  been  said,  that  a  mem- 

diently  sustained  by  the  .general  ber  cannot,  by  withdrawing,  escnpe 

spirit  of  the  court's  reasoning  in  his  share  of  the  expenses  aud  losses 

Wetterwulgh  v.  The  Knickerbocker  of  the  association  to  the  time  of  his 

Building  Association,  supra;  Hen-  withdrawal.  See  ante,  §§  104-106, 

nighausen  and  Wolff,  Rec'rs,  v.  108. 


§  140.]  BIGHTS   OF  MEMBRRS,  177 

granted  by  charter  or  by-law,  or  ordained  by  statute,  to  keep 
itself,  as  far  as  practicable,  and  in  accordance  with  the  die 
tates  of  experience  and  reason  as  to  the  probable  amount  re- 
quired for  withdrawals,  iu  readiness  to  meet  their  demands. 
It  is  always  improper  for  a  building  association,  and,  under 
statutory  sanction  and  regulation  of  withdrawals,  an  abuse  of 
the  corporate  power,  to  invest  all  its  funds,  and  leave  none 
available  for  the  calls  of  withdrawing  members.1  A  lack  of 
funds  from  that  reason  would  constitute  no  defence  on  the 
part  of  the  building  association,  nor  establish,  in  itself,  a 
ground  for  indulgence  in  the  payment  of  withdrawing  mem- 
bers' claims. 

Statutory  Limitation  of  Funds  Available  for  Withdrawing  Members. 
§  140.  The  statutory  mandate,  binding  upon  the  building 
association,  giving  the  absolute  privilege  of  withdrawal,  with 
profits,  upon  compliance  with  the  terms  and  requisitions  of 
the  enactment,  as  to  notice,  etc.,  compels  the  payment  of  such 
claims  upon  demand,  in  accordance  with  the  statute,  and  after 
expiration  of  the  legal  period  of  notice.  The  inconvenience 
which  might  arise  to  the  society  from  multiplied  simulta- 
neous withdrawals,  and  the  danger  and  iatal  embarrassment 
to  which  its  affairs  might  thus  fall  subject,  at  any  moment, 
at  the  pleasure  of  even  a  comparatively  small  number  of 
dissatisfied,  evil-disposed,  or  unreasonable  shareholders,  are 
averted  by  the  coupling,  with  that  provision,  of  another, 
whereby  not  more  than  a  certain  proportion  of  the  funds  in 
the  treasury  shall,  at  any  one  time,  be  applicable  to  the  satis- 
faction of  withdrawing  members,  except  by  the  consent  of 
the  directors  of  the  building  association.  This,  then,  be- 
comes a  charter  limitation  upon  the  rights  of  withdrawing 
members,  and  operates  to  prevent  a  conflict  between  them 
and  the  undisturbed  exercise  of  the  association's  corporate 
functions,  by  narrowing  them  down  to  a  certain  portion  of 
its  assets  as  the  source  of  their  payment;  whilst,  at  the  s;m.<> 
time,  it  is  a  check  upon  the  society  itself,  an  indication  of 
the  proportion  of  funds  which  it  should  be  ready  to  disburse 

1  National  Loan  and  Homestead  Association  v.  Hubley,  34  Leg.  Int. 
(Pa.)  6:  24  L.  J.  50. 


178  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.   VII. 

at  short  notice,  and  a  warning  against  too  marginless  invest- 
ments.1 

Effect  thereof  upon  Right  to  Enforce  Payment  by  Suit. 

§  141.  In  the  presence,  side  by  side,  of  these  several  pro- 
visions, a  question  arises  as  to  the  rights  of  a  withdrawing 
member,  who  has  not  been  paid  by  the  association,  and  has, 
in  consequence,  instituted  his  action  against  it.  If  the  pro- 
portion of  its  funds,  pointed  out  by  the  act,  has  already  been 
applied  in  the  payment  of  withdrawal  claims,  and  the  direc- 
tors consent  to  no  further  draining  of  the  treasury,  has  he  the 
right  to  sue  and  to  proceed  to  judgment,  or  must  he  wait 
until  the  society  has  funds  to  pay  him  ?  And  if  he  gets  judg- 
ment, can  he  issue  his  execution  ?  A  case  precisely  in  point 
has  been  decided  in  Pennsylvania. 

§  142.  A  stockholder  of  a  building  association,  incorpo- 
rated under  the  Act  of  April  12,  1859,  gave  the  required 
notice  of  his  intention  to  withdraw  from  the  association. 
Upon  the  failure  of  the  latter  to  refund  the  money  he  had 
paid  in,  he  brought  suit  therefor.  It  was  provided  in  the 
act  that  at  no  time  should  more  than  one-half  of  the  funds 
in  the  treasury  of  the  corporation  be  applied  to  the  demands 
of  withdrawing  stockholders,  except  by  the  consent  of  the 
directors  of  the  association.  On  an  affidavit  of  defence,  the 
association  averred  that  fifty  per  cent,  of  its  funds  had  already 
been  so  applied,  and  that  the  directors  refused  to  apply  any 
more,  for  the  time  being.  It  was  held,  that  the  withdrawing 
stockholder  was  not  estopped  by  the  proviso  of  the  act  from 
legal  process  for  the  recovery  of  his  money  until  the  treasurer 
might  have  funds  sufficient  to  meet  his  claim,  but  was  en- 
titled to  his  judgment  for  the  same.1  It  is  said  that  the  fact 
that  the  association  has  no  money  is  not  an  answer.  "  That  he 
<may,  upon  the  refusal  of  the  company  to  pay  him,  sue  it,  and 
recover  judgment,  just  as  any  other  creditor,  is  not  doubtful. 
It  is  urged,  however,  that  he  is  estopped  by  the  proviso,  from 
legal  process,  for  the  recovery  of  his  money,  until  the  treasury 
Jias  funds  sufficient  to  meet  his  claim.  If  this  be  the  true  in- 


1  Ib. ;  U.  8.   Building  and  Loan         9  Building  Association  v.   Silver- 
Association  v.  Silverman,  85  Pa.  St.     man,  supra. 
394;  35  Leg.  Int.  51;  4  W.  N.C.  546. 


§  143.]  RIGHTS   OF  MEMBERS.  179 

terpretation  of  the  statute,  then  is  this  creditor  in  a  most  un- 
fortunate position  ;  for  the  corporation  may  never  choose  to 
make  the  necessary  provision  for  such  purpose,  and  therefore 
he  can  never  hare  process  to  compel  it  to  do  so.  It  is  a  fact 
now  alleged  that  this  company  has  no  money  to  apply  to  the 
claim  in  suit.  "When  will  it  have  ?  in  one,  six,  or  ten  years, 
or  ever  ?  And  vrill  the  Statute  of  Limitations  be  suspended 
in  the  mean  time  2  To  these  questions  the  defendant  but  an- 
ewers :  The  proviso  interposes  to  prevent  the  plaintiff  from 
all  compulsory  process,  though  his  claim  be  recognized,  in 
the  body  of  the  statute,  as  just  and  proper,  as  long  as  the  cor- 
poration manage  to  maintain  an  empty  treasury,  or,  which  is 
the  same  thing,  us  long  as  prior  drafts  leave  no  money  to  be 
applied  to  his  debt.  Looking  at  the  statute  as  a  whole,  we 
are  not  prepared  to  adopt  an  interpretation  so  contrary  to  its 
spirit  and  the  plain  dictates  of  justice.  Whilst  it  is  certainly 
intended  that  the  operations  of  the  corporation  shall  not  be 
embarrassed  by  having  the  whole  amount  of  its  cash  assets 
taken,  in  order  at  once  to  pay  the  withdrawing  stockholders, 
yet  it  certainly  does  not  intend  that  no  provision  shall  be 
made  for  their  payment,  and  that  they  may  be  indefinitely  post- 
poned, even  from  judgment,  by  a  plea  of  quasi  insolvency." ' 
§  143.  The  withdrawing  member  is,  therefore,  entitled  to 
his  judgment ;  but  when  he  comes  to  the  execution  of  it 
against  the  association,  the  design  of  the  proviso  is  made 
manifest  and  its  whole  object  served,  by  enabling,  or,  rather, 
obliging,  the  court  to  restrain,  should  it  be  made  to  appear 
just  and  equitable,  the  plaintiff's  execution,  in  order  to  give 
the  building  association  a  reasonable  time  to  raise  the  money 
without  undue  derangement  of  its  affairs.1  There  is,  indeed, 
no  other  just  and  safe  application  to  be  made  of  it.  Its  ob- 
ject is  to  prevent  a  crowding  of  claimants,  to  the  prejudice 
and  destruction  of  the  interests  of  the  association  and  the 
rights  of  many  of  its  members.  That  purpose  is  fully  served 
by  the  view  above  laid  down  ;  and,  at  the  same  time,  it  con- 
cedes to  the  member  the  right  of  reducing  his  claim  to  judg- 
ment, with  the  additional  security  afforded  thereby, — a  right, 

1   U.  S.  Building  Association  v.         8   U.  S.  Building  Association  t>. 
Silverman,  85  Pa.  St.  394;  opinion     Silvcrman,  supra, 
of  Gordon,  ,1. 


180  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [cil.  VII, 

to  deprive  him  of  which  would  be  highly  improper  and  in- 
equitable, lie,  the  creditor,  would  thus  be  thrown  entirely 
upon.  ;he  mercy  of  the  association,  the  debtor;  the  which,  be- 
in^  too  complete  a  reversal  of  the  old-fashioned  order  of 
things  ihe  world,  in  its  present  state  of  morals,  is  scarcely 
titted  to  permit,  with  promise  of  anything  like  the  same  degree 
of  satisfaction  to  the  creditor  as  to  the  debtor.  The  interpre- 
tation put  upon  the  relation  of  the  provisions  under  discussion 
in  the  foregoing  case,  and  the  disposition  of  the  difficult  ques- 
tions involved  in  the  conflicting  rights  and  claims  springing 
from  the  ono  and  the  other,  may,  therefore,  in  every  sense  of 
the  word,  be  called  a  "  most  righteous  conclusion."  ' 

Stockholder  Cannot,  qua  Stockholder,  Sue  Society  at  Law  for  Value  of 
Paid-up  Stock. 

§  144.  Membership  in  a  building  association  gives  ground 
to  no  exception  to  the  general  rule  relating  to  corporations, 
that  a  shareholder,  qua  shareholder,  cannot  sue  at  law  for  the 
value  of  his  paid-up  stock.  If  he  desires  to  participate  in  all 
the  profits  of  tne  concern,  he  must  wait  until  the  society,  or 
the  series  to  which  he  belongs,  is  wound  up ;  an  operation 
which,  on  account  of  sales  of  real  estate,  and  other  arrange- 
ments necessary  to  be  made,  in  order  to  realize  the  money  re- 
quired to  pay  the  unadvanced  shares  in  cash,  may  call  for 
some  indulgence  in  the  matter  of  time.  The  only  method  of 
obtaining  the  money's  worth  of  his  shares  from  the  associa- 
tion, is  that  already  pointed  out,  viz.,  withdrawal  under  the 
statute  or  by-laws,  and  suit  at  law  for  the  amount  legally 
coming  to  him."  The  value  of  any  member's  stock,  as  has. 
before  been  shown,  is  not  a  present  subsisting  claim  against 
the  building  association  in  the  member.  Its  value,  if  he  con- 
tinues in  the  society,  depends  upon  his  going  through  the 
whole  course  of  the  scheme,  and  can  be  ascertained  only  upon 
and  after  complete  winding-up.1  As  a  member,  therefore,  he 
cannot  sue  for  it  at  law,  at  any  time.  He  can  become  a  claim- 

1  Ludlow,  P.  J.,  in  Estate  of  Na-  W.  N.  C.  (Pa.)  176,  93  Pa.  St.  308. 

tional    Savings,  Loan    and   Build-  See  also  post,  §  265.  note, 

ing  Association,  9  "W.  N.  C.  (Pa.)  3  /.  «.,  after  the  final  meeting  to 

79.  make  division :  Britton  r.  American 

*  O'Rourke  r.  West  Pennsylvania  Building  and  Loan  Association,  12- 

Loan  and  Building  Association,  8  Phila.  (Pa.)  430;  35  Leg.  Int.  474. 


§  147.]  RIGHTS   OF   MEMBERS.  181 

ant  for  a  definite  amount  only  by  withdrawal,  i.e.,  by  surren- 
der of  his  membership,  substituting  in  its  place  the  character 
of  creditor,  pure  and  simple. 

Member  may,  under  Circumstances,  Compel  Settlement  in  Equity. 

§  145.  It  is,  however,  a  right  belonging  to  every  member 
of  a  building  association,  by  virtue  of  his  membership,  in  a 
proper  case,  and  under  proper  circumstances,  to  invoke  the 
jurisdiction  of  a  court  of  equity,  to  wind  up  the  society,  and 
then  compel  settlement, — a  subject  which  will  hereafter,  in 
its  proper  connection,  be  more  fully  discussed.1 

Foundation  of  the  Principles  Applicable  to  Borrowers.      Mutuality 
of  the  Scheme.     Membership  of  Borrowers. 

§  146.  Having  thus  reviewed  the  rights  of  membership 
generally,  and  the  privileges  pertaining  distinctively  to  the 
class  of  unadvanced  members,  investors,  in  building  associa- 
tions, it  remains  to  consider  that  branch  of  the  subject-matter 
embraced  in  the  examination  of  the  "  Rights  of  Members," 
which  refers  peculiarly  to  advanced  members,  borrowers. 
In  order  to  appreciate  the  distinctions  which  the  law  makes 
between  these  two  classes,  and  the  entirely  new  set  of  rights 
clustering  around  the  latter,  it  is  necessary,  first  of  all,  fully 
to  understand  the  relations  which  the  borrowing  member 
sustains  to  the  association. 

§  147.  Starting  with  the  elementary  working  principle  of 
the  building  association  scheme,  a  system  of  perfect  mutual- 
ity and  reciprocity  and  equality  of  all  members,  whereby  the 
gain  of  one  must  be  the  gain  of  all,  and  every  advantage 
enjoyed  exclusively  by  one,  must  be  accompanied  with  a 
corresponding  and  compensating  benefit  to  the  entirety ;  it 
follows,  wnth  logical  cogency,  that,  whatsoever  accommodation 
any  individual  member  may  receive,  some  equivalent,  beyond 
the  mere  repayment  of  money  (for  there  is  nothing  particu- 
larly mutual  in  that),  must  by  him  be  returned  to  the  society, 
and  that,  in  the  discharge  of  this  obligation,  he  is  again  en- 
titled to  his  proportionate  share,  by  way  of  relief,  in  the 
advantages  which  may  accrue  to  the  society  from  other 
sources.  From  this  self-evident  proposition,  flow  all  the 
rights,  as  well  as  all  the  distinctive  obligations,  of  borrowers 

1  See  post,  §§  483-491. 


182  THE   LAW   OP   BUILDING   ASSOCIATIONS.       [CH.  VIL> 

in  building  associations,  and  it  at  once  defines  and  settles  the 
status  of  such  members  in  them.  For  that  borrowers  neces- 
sarily remain  members,  at  least  in  the  sense  of  continuing 
entitled  to  share  in  the  profits  of  the  enterprise,  it  is  im- 
possible, in  practice,  to  deny,  whatever  may  be  the  theory 
held  with  regard  to  this  subject,  and  however  they  may  be 
restricted  in  exercising  the  general  rights  of  membership  in 
corporations  through  the  attempted  application  of  such 
theory.  It  is  held  in  Virginia,  that,  when  a  member  of  a 
building  association  obtains  an  advance  upon  his  shares,  the 
building  association  thereby  acquires  the  right  of  property 
therein ;  and  the  assignment  of  the  shares  to  the  society  for 
the  advance  received  is  not  a  hypothecation  for  a  loan,  but 
an  absolute  surrender  of  them  to  the  building  association, 
whereby  they  are  sunk  and  extinguished,  and  cannot  entitle 
the  borrower  to  participate  in  the  final  division  and  distribu- 
tion of  the  funds  of  the  association.  But,  it  is  said,  such 
assignment  does  not  release  him  from  his  covenant,  as  a 
party  to  the  articles  of  association,  to  make  his  regular 
monthly  payments  on  shares,  and  on  account  of  fines, — obli- 
gations which  are  secured  by  his  bond  and  mortgage.1  And 
yet  there  is  only  one  form  which  the  contract  between  a 
building  association  and  the  borrowing  member  may  assume, 
under  which  the  latter  can,  by  any  practicable  method,  be 
debarred  from  participation  in  the  profits  of  the  society, 
and  that  is  one  which  has  none  of  the  features  of  the 
building  association  scheme  about  it,  save  that  of  gradual 
repayment.  It  is,  where  a  member,  obtaining  an  advance^ 
surrenders  his  membership,  and  gives  his  bond  for  the  period- 
ical repayment  of  a  certain  amount,  to  be  applied  in  liquida- 
tion of  the  principal  sum,  until  such  monthly  payments 
themselves,  in  the  aggregate,  shall  amount  to  the  principal 
sum  ;  and  adopting,  as  part  of  his  contract,  the  regulations 
of  the  by-laws  of  the  society  as  to  penalties  for  neglect,  etc.* 
Under  such  an  arrangement,  it  is  clear,  the  borrower  no 

1  White  v.  Mechanics'  Building  the  duties  of  membership,  and  has 

Association,  22  Gratttn  (Va.),  233;  even  put  himself  under  bonds  to  be 

Winchester    Building    Association  a  good  member, 

et  al..  23  Id.  787.    Observe  the  in-  *  See  Bowker  v.  Mill  River  Loan 

consistency:  he  has  lost  his  member-  Fund  Association,  7  Allen  (Mass.), 

ship,  but  is  bound,  as  a  member,  to  100. 


§  148.]  RIGHTS   OF   MEMBERS.  183 

longer  has  any  interest  in  the  society.  All  he  has  to  do,  is  to- 
pay  up  until  his  payments  aggregate  the  sum  borrowed. 
Then  he  has  nothing  more  to  do  with  the  society.  He  may 
calculate,  to  the  day,  when  this  will  occur.  But  upon  any 
other  plan,  the  borrower,  undertaking  to  continue  his  pay- 
ments until,  having  gone  into  the  general  fund,  they,  with 
the  other  contributories,  have  swelled  it  to  a  certain  magni- 
tude, distinctly  retains  his  interest  in,  his  right  to  benefit  by, 
his  privilege  to  participate  in,  the  profits  derived  from  all 
those  various  sources.  It  cannot,  therefore,  upon  any  logical 
principle  be  said,  that  he  has  one  particle  less  interest  in  the 
common  fund  of  the  association  than  before  he  became  a 
borrower ;  that  the  whole  scheme  is  in  the  slightest  degree 
less  mutual,  as  to  him,  than  it  was  before ;  that  the  manage- 
ment of  the  society's  business,  and  the  proper  administration 
of  its  affairs,  are  of  any  less  moment  to  him,  as  a  borrower, 
than  they  were  to  him  as  an  investor.  In  the  latter  character 
he  was  anxious  to  see  it  prosper  for  the  sake  of  speedily  real- 
izing the  prospective  cash  value  of  his  share ;  in  the  former, 
having  anticipated  that  cash  value,  subject  to  a  heavy  dis- 
count, he  is  equally,  nay,  more  concerned  to  hasten  the  period 
of  his  discharge ;  for,  in  addition  to  his  stock-payments,  which 
he  has  obligated  himself  to  pay  equally  as  if  he  were  an 
investor  only,  and  as  to  which  he  has  surrendered  the  right 
of  withdrawal,1  he  is  obliged  to  pay  interest  upon  the  money 
he  has  received."  Now,  if  he  retains  all  the  interests  of 
membership  in  the  building  association,  which  are,  at  all 
times,  the  basis  of  its  rights,  he  certainly  retains  all  of  the 
latter.  In  other  words,  a  borrower  continues,  in  every 
sense  of  the  word,  a  member  of  the  association.  There  is 
not,  even  in  America,  perfect  unanimity  among  the  courts 
upon  this  question,  when  put  in  its  simplest  and  most  di- 
rect form.  But  it  becomes  the  more  important,  as  much 
of  the  uncertainty  in,  and  conflict  between,  our  judicial  in- 
terpretations of  the  law  of  building  associations,  is  referable 
solely  to  an  imperfect  understanding  of  this  fundamental 
principle. 

§  148.  But,  although  the  full  force  and  bearing  of  the 

1   The  consequence  of  taking  a        a  If  not  by  name,  then  by  way  of 
loan,  see  post,  §  151.  increased  dues,  premiums,  etc. 


184  THE   LAW   OF   BU1LIMNG    ASSOCIATIONS.       [CH.   VII. 

principle  has  sometimes  failed  to  receive  its  proper  weight, 
the  principle  itself  has  been  sufficiently  often  asserted  by 
courts  of  this  country,  upon  questions  arising  in  particular 
associations,  as  to  place  it  beyond  the  reach  of  cavil. 
•uv  understand  the  relative  position  of  the  two  classes  of 
members,"  says  the  court  in  Maryland,1  "  they  might  perhaps 
be  better  designated  as  the  '  advanced,'  or  prepaid,  and  the 
''deferred,'  or  unpaid,  shareholders.  They  are  all  continuing 
members,  however  classified,  until  the  association  is  deter- 
mined, unless  they  cease  to  be  so,  in  pursuance  of  the  articles. 
The  advanced,  or  'prepaid'  members  .  .  .  have  not  ceased 
to  be  members,  by  the  prepayment,  but  continue  to  hold  an 
interest  in  the  management  and  success  of  tho  association,  as 
upon  that  depends  their  earlier  relief,  not  only  from  the  pay- 
ment of  the  weekly  dues,  but  their  final  release  from  their 
mortgages.  .  .  .  Both  are  interested,  and  under  a  mutual  ob- 
ligation to  contribute  to  the  accumulation  of  the  common 
fund,  by  payment  of  their  weekly  dues,  until  the  time  pro- 
vided for  its  final  distribution  and  settlement."  And,  again, 
it  is  said  in  New  Jersey : "  "  There  is,  it  is  shown,  a  formal 
transfer  of  the  shares  to  the  association,  as  collateral  security 
for  the  repayment  of  the  loans.  But  the  shareholder  is  not 
deprived  of  his  title  to  the  stock.  He  still  continues  to  be  a 
member,  with  all  the  rights  of  membership.  He  is  by  ihe 
constitution  regarded  as  a  stockholder.  As  such,  he  is  re- 
quired to  pay  his  monthly  instalments  on  each  share.  He 
may  vote,  act  as  a  director  or  other  officer,  and  in  fact  do 
every  act  which  a  stockholder  may  do,  except  transfer  his 
title  to  his  shares.  Even  that  he  may  do,  subject  to  the  lien 
of  the  association."  A  similar  doctrine  has  been  established 
in  Ohio,8  where  the  transaction  between  the  society  and  the 

1  Lister  t.  The  Log  Cabin  Build-  pressed  in  this  case  would  make  the 

ing  Association,  38  Md.  115.  borrowing  member's  position  an  im- 

8  Mechanics'  Building  and  Loan  possible  one  if  strictly  applied.  It 

Association  of  New  Brunswick  ».  is  said  that  the  real  transaction  be- 

Conover  et  al.,  1  McCart.  (N.  J.)  tween  the  borrower  and  the  corpo- 

219;  (not  disturbed  in  this  particular  ration  is  equivalent  to  the  redemp- 

in  2  C.  E.  Gr.  497).  li»n  by  it  of  his  stock  in  advance, 

8  Hagerman  et  al.  v.  The  Ohio  and  that,  thereafter,  he  has  no  in- 

BuiLling  and  Savings  Association,  terest  in  the  final  distribution  of  the 

25  Oliio  St.  186.  The  doctrine  ex-  company's  funds:  but  if  there  is  a 


§  148.] 


KIGHTS    OF    MEMBKKS. 


185 


borrowing  member  is  held  to  be  of  such  a  nature  as  to  save 
*'  to  the  member  his  rights  as  a  corporator."  And  in  Georgia, 
he  "  still  retains  his  right  to  vote  and  act  as  a  member." ' 
And  it  may  be  safely  stated,  that  the  doctrine  has  forced  its 
own  recognition  upon  the  courts  of  nearly  every  State  in  the 
Union,  as  well  as  England.  It  may,  it  is  true,  not  have 
found,  upon  all  occasions,  express  and  explicit  judicial  sanc- 
tion. In  theory,  it  may  have  been  persistently  denied.  Yet, 
in  its  results,  it  has,  in  some  form  or  other,  been  everywhere 
applied  ;  and  in  the  condemnation  of  the  outrageous  conse- 
quences flowing  from  the  opposite  doctrine,  it  has,  at  some 
time  or  other,  been  everywhere  confirmed.  It  is  needless  to 
point  out  these  coincidences  at  this  place.  They  will  suffi- 
ciently appear  at  every  step  of  the  subsequent  discussion. 
But  it  is  essential,  in  order  to  its  understanding,  to  keep  the 
principle  itself  firmly  in  view. 


surplus  of  assets,  the  amount  re- 
ceived by  him  on  his  redeemed  shave 
being  exceeded  by  the  value  of  it 
before  the  termination  of  the  socie- 
ty; i.e.,  if  the  shartw  turn  out  to  be 
•worth  more  than  the  estimated  par 
value,  which  hns  bwn  advanced  to 
him,  he  may  still  come  in  upon  that 
surplus  fund,  for  his  dividends  as  a 
shareholder.  Both  of  these  propo- 
sitions cannot  be  true  at  the  same 
time.  If  the  society  owns  the  shares, 
the  member  has  hwt  them,  and  with 
them  his  membership.  (See  ante,  § 
102.)  He  cannot  then  retain  any  of 
his  "rights  as  a  corporator,"  nor 
participate  as  such  in  any  sort  of  f  u- 
ture  distribution.  Yet  this  is  an  un- 
questionable right,  proclaimed  by 
the  most  ordinary  common  sense 
and  sense  of  justice,  no  less  than  by 
a  proper  consideration  of  the  pur- 
pose and  working  of  the  scheme. 
It  follows,  therefore,  that  the  doc- 
trine above  staled  is  the  true  and 
correct  doctrine  of  this  case. 


1  Parker  v.  The  Fulton  Loan  and 
Building  Association,  46  Ga.  166. 
See  also  Pattison  v.  The  Albany 
Building  and  Loan  Association,  63 
Id.  373;  North  America  Building 
Association  v.  Sutton,  35  Pa.  St. 
463;  Early  and  Lane's  App.,  89  Pa. 
St,  411;  Citizens'  Mutual  Loan 
and  Accumulating  Fund  Associa- 
tion v.  Webster,  25  Barb.  (N.  Y.) 
263;  Hekelnkaemper  et  al.  v.  The 
German  Building  and  Savings  As- 
sociation, 22  Kas.  540;  Ocmulsree 
Building  and  Loan  Association  v. 
Thomson,  52  Ga.  427;  Lincoln 
Building  and  Savings  Association 
t>.  Graham.  7  Neb.  173;  Same  ». 
Benjamin,  Ib.  181;  Herbert  ».  Ken- 
ton  Building  and  Savings  Asso- 
ciation, 11  Bush  (Ky.),  296.  But 
see  Overby  v.  Fayetteville  Build- 
ing and  Loan  Association,  81  N.  C. 
56  ;  S.  P.  Hoskins  >•.  Mechanics' 
Building  and  Loan  Association.  84 
Id.  838. 


186  THE   LAW   OF   BUILDING    ASSOCIATIONS.        [CH.  VII. 

Elements  of  Contract  Between  Borrowing  Member  and  Society. 

§  149.  It  follows,  from  this  principle,  that,  when  a  mem- 
ber of  a  building  association  becomes  a  borrower,  his  original 
contract  with  the  association,  and  that  of  the  latter  with  him, 
together  with  the  rights  and  obligations  resulting  therefrom 
to  each  respectively,  continue  in  force  intact,  except  in  such 
minor  details,  not  affecting  the  membership  of  the  borrower, 
in  which  they  may  have  been  varied  by  the  conditions  of  the 
new  contracts  entered  into  by  both  parties,  whether  expressed 
or  implied.     On  the  part  of  the  borrower,  this  new  contract 
may,  in  general,  be  said  to  embrace  the  following  essential 
features:  (1)  The  member  agrees   to   receive  the  advance- 
ment from  the  building  association,  and  to  allow  it,  for  the 
privilege  of  the  preference,  a  certain  stipulated  price,  pre- 
mium, or  bonus.     (2)  He  undertakes,  and  gives  security  in 
support  of  the  undertaking,  faithfully  to  perform,  to  the 
termination  of  the  society's  existence,  or  the  running  of  a 
series,  all  the  requirements  of  its  constitution  and  by-laws 
relative  to  stock-payments,  or  dues,  fines,  and  other  charges, 
upon  and  in  respect  of  the  shares  held  by  him  (which,  as  a 
rule,  he  pledges  to  the  society  as  collateral  security),  and  to 
be  liable  for  and  discharge  all  proper  dues,  assessments,  con- 
tributions, and  charges,  arising  upon  them,  in  the  same  pro- 
portion and  in  the  same  manner  as  the  rest  of  the  members ; 
and,  in  addition,  to  make  a  fixed  periodical  payment  by  way 
of  interest  on  his  loan,1  either  by  that  name,  or  in  the  way  of 
a  stipulated  increase  in  the  regular  dues  corresponding  with 
the  interest  upon  the  loan.     (3)  He  agrees,  that,  upon  the 
termination  of  the  society,  when  its  assets  shall  become  dis- 
tributable, it  shall  appropriate  to  its  own  reimbursement  the 
proportion  accruing  to  such  of  his  shares  as  were  advanced  to 
him.     (4)  He  agrees,  that,  in  case  of  his  failure  at  any  time 
to  perform  the  continuing  conditions  of  his  undertaking,  for 
a  certain  period ;  or  for  such  remissness  in  the  payment  of 
dues,  etc.,  as  would  be  ground  of  forfeiture  of  his  shares  as  a 
member,  the  society  shall  be  absolved  from  the  necessity  of 
waiting,  until  the  period  of  dissolution,  for  its  payment,  but 

1  The  society  is,  of  course,  not  pal  has  been  all  repaid.  In  re  Gold- 
entitled  to  any  payment  in  respect  smith,  ex  parte  Osborn,  10  L.  R, 
of  interest  accruing  after  the  princi-  CL.  41.  But  see  post,  g§  375-376. 


§  151.]  RIGHTS   OF  MEMBERS.  187 

shall  have  the  right  to  demand  and  recover  it  from  him  at 
once,  including,  in  the  debt,  not  only  the  amount  actually 
loaned,  but  all  the  payments  and  charges  which  may,  law- 
fully, under  his  obligation,  as  member  and  borrower,  be  de- 
manded from  him. 

§  150.  The  building  association,  in  its  turn,  assumes  cer- 
tain corresponding  obligations  towards  the  borrower.  (1) 
It  agrees  to  let  him  have  the  use  of  the  money  advanced  dur- 
ing the  continuance  of  the  society's  legal  life,  or  the  running 
of  a  series,  provided  he  lives  up  to  the  terms  of  his  undertak- 
ing.1 (2)  In  the  meanwhile,  it  is  to  receive  and  invest  the  pay- 
ments made  by  him,  both  as  dues  and  as,  or  in  lieu  of,  interest, 
in  the  same  manner  as  those  of  other  members,  and  as  part 
of  the  common  fund.  (3)  Finally,  upon  the  winding  up 
of  the  concern,  it  is  to  account  to  him  for  such  proportion 
of  his  whole  accumulation,  as  may  be  coming  to  his  share, 
retaining  so  much  as  may  be  necessary  to  cover  his  propor- 
tionate share  of  the  losses  and  expenses,  and  applying  the 
balance  to  the  liquidation  of  his  debt,  including  the  actual 
advance,  interest,  fines,  and  premium,  according  to  his  under- 
taking, arid  thereupon  cancelling  his  securities. 

Borrowing  Member  Cannot  Withdraw. 

§  151.  Such  being  the  contract  subsisting  between  the  two 
parties,  it  is  perfectly  plain  that  the  borrowing  member  is 
not  in  a  position  to  withdraw  from  me  society.*  And  this 
is  quite  just,  for,  having  received,  in  advance,  the  benefit  of 
the  whole  scheme,  he  is,  in  common  fairness,  bound  to  con- 
tribute until  all  derive  an  equal  advantage.'  And  yet  the 
same  reasons,  which  may  make  withdrawal,  at  some  time, 

1  This  is  the  understanding,  al-  Building  and  Savings  Association, 

though  the  mortgage  may  be  drawn  25  Ohio  St.  186;  Smith  v.  The  Me- 

to  stand  for  a  year  only.     The  in-  chanics'  Building  and  Loan  Asso- 

tention  is  not  to  collect  at  all,  but  ciation,  73  N.  C.  872.     See  post,  §§ 

to  let  the  association  run  its  course,  326-337. 

and  cancel  the  mortgage  with  the  9  Watkins  r.  The  WorUngmon's 

borrower's  dividend  upon  his  shares.  Building  and  Loan  Association,  10 

Kupfert  v.  Guttenberg  Building  As-  \V.  N.  C.  (P».)  414;  38  Leg.   Int. 

sociation,   80  Pa.  St.  465;  Ik-keln-  333;  97  Pa.  St.  514. 

kacmpcretal.  e.  The  German  Build-  'Barry,  Law  of  Building  Socic- 

ing  and  Savings  Association,  22  Kas.  ties,  §  26. 
540;  Ilagrrman  et  al.  v.  The  Ohio 


188  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  VLL 

most  desirable  to  the  investor,  may  operate  in  the  case  of  a 
borrower,  either  necessitating  a  cessation  of  his  relations  with 
the  society,  or  holding  out  peculiar  opportunities  for,  and  ad- 
vantages in,  relieving  himself  at  once  from  indebtedness  to  it. 
It  is,  therefore,  most  necessary  that  some  method  should  be 
provided,  by  which,  with  perfect  justice  to  the  society  and 
without  hardship  to  himself ,  he  should  be  enabled  to  discharge 
his  liabilities,  before,  in  the  regular  course  of  things,  the 
steady  progress  of  the  scheme  will  work  it  out  for  him. 

Right   of  Voluntary  Repayment. 

§  152.  Conceding  the  justice  and  propriety  of  the  claim,  the 
difficulty  lies  in  ascertaining  the  exact  amount  which  the  bor- 
rower ought  to  pay,  at  any  given  time,  in  order  to  return  to 
the  society  the  exact  sum  of  money  in  the  aggregate,  for  the 
payment  of  which  in  installments  his  obligation  calls.  The 
advantage  of  borrowing  from  building  associations  (leaving 
out  of  the  question  the  facilities  for  gradual  discharge  of  the 
indebtedness),  the  consideration,  which,  in  a  measure,  justifies 
the  high  premiums  such  loans  command,  arises  largely  from 
the  uncertainty  as  to  the  precise  amount  the  borrower  will  be 
obliged  to  lay  out  in  tne  eventual  return  of  the  loan.  If  the 
society  is  successful,  it  may  be,  in  the  whole,  a  sum  much  in- 
ferior to  the  face  of  the  obligation,  and  very  slightly,  if  at 
all,  in  excess  of  the  amount  actually  received,  with  interest. 
On  the  other  hand,  it  has  already  been  seen  that  it  is  impos- 
sible to  compute  the  true  indebtedness  of  a  member  to  the 
association,  without  taking  into  the  reckoning  a  profit  and  loss 
account,  and  an  expense  account  for  management,1  his  pro- 
portionate share  of  which  is  an  essential  part  of  his  liability 
under  the  mortgage  or  other  security  he  has  given  to  the 
society.1 

§  153.  The  true  view  of  this  indebtedness,  in  fact,  is,  that 
the  return  of  the  money  received,  at  any  period  intermediate 
between  the  time  of  taking  it  and  the  time  of  the  ultimate 
squaring  of  accounts  upon  the  expiration  of  the  society,  or 
series,  is  not  contemplated  by  the  contract.'  That  money  is 

1   Pattison  v.  The  Albany  Build-  and  Loan  Association,  44  Pa.   St. 

iiiir  and  Loan  Association,  63  Ga.  383. 

373.  »  See  Seagrave  v.  Pope,  22  L.  J., 

*  McGrath  v.   Hamilton  Savings  Ch.  258;  16  Jur.  1099;  19  L.  T.  Rep. 


§  154.]  RIGHTS   OF   MEMBERS.  189 

never,  before  that  period,  intended  to  be  collected,  or  repaid.1 
The  essential  feature  of  the  contract  is  the  continued  payment 
of  certain  dues ;  the  incident,  the  payment  of  interest  as  a 
compensation  for  the  use  of  the  money.  Even  where  the 
obligation  is  given  for  the  repayment  of  a  specific  sum  of 
money,  with  interest,  the  character  it  would  seem  to  derive 
from  that  fact,  is  modified  and  overcome  by  the  provisions 
which  may  follow  as  to  the  payment  of  dues,  etc.,  showing 
clearly  the  true  intent  of  the  transaction.  Such,  then,  being 
the  real  nature  of  the  borrower's  undertaking, — to  stand  by 
the  society  to  its  end,  and  to  continue,  throughout,  certain 
stipulated  payments, — it  would  appear  that  the  very  terms  of 
the  contract  precluded  any  determination  of  its  requirements 
before  the  period  set  by  itself.  Such,  indeed,  judicial  utter- 
ances would  seem  to  indicate  as  the  view  first  held.2  But  it 
promptly  became  recognized  that  a  method  by  which  the  bor- 
rower would  substantially  comply  with  the  requirements  of 
his  contract,  might  absolve  him  from  the  literal  fulfilment 
of  it ;  i.e.,  that,  having  obligated  himself  to  a  long  series  of 
small  payments,3  he  might  be  allowed  to  substitute,  in  lieu 
thereof,  a  single  larger  one,  equal,  at  once,  to  the  aggregate  of 
all  the  smaller  ones. 

Terms  of,  and  Rules  for,  Voluntary  Repayment,  in  the  Absence  of  Spe- 
cial By-Law  or  Statutory  Provisions. 

§  154.  The  rule  has,  therefore,  been  adopted  in  England, 
and  recognized  in  America,  that  a  borrowing  member  of  a 
building  association  may  redeem  his  property  mortgaged,  and 
discharge  his  indebtedness,  to  the  same,  upon  payment  of  all 
the  future  subscriptions  which  would  accrue  against  him  until 
the  dissolution  of  the  society,4  its  probable  duration  to  be 

173;  20  Id.  158;  1  De  G.,  M.  and  G.  22    Grat.    (Va.)    233;    Winchester 

783;     15    Engl.    L.    &    Eq.    477;  Building  Association  v.  Gilbert  ct 

Fleming  v.   Self,  24    L.    T.    Rep.  al.,  23  Id.  787;  Williar  t>.  The  Bal- 

101;  18  J.  P.  772;  24  L.  J.,  Ch.  29;  timore  Butchers'  Loan  and  Annuity 

3  De  G.,  M.  and  G.  997;  3  Eq.  Rep.  Association,  45  Md.  546. 

14;   Hagerman  et  al.   t>.   The  Ohio  '  Kupfert  v.  Guttenberg  Building 

Building  and  Savings  Association,  Association,  30  Pa.  St.  465. 

25  Ohio  St.  186;  Lister  T.  Log  Cabin  *  See  Seagrave  v.  Pope,  supra. 

Building  Association,  88  Md.  115;  *  Robertson    r.     The     American 

Hoboken   Building   Association   v.  Homestead  Association,  10  Md.  397. 

Martin.  2  Beas.  (N.  J.)  428;  White  4  Or  the  expiration  of  the  series. 
9.  Mechanics'  Building  Association, 


190 


THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  VII. 


ascertained  by  calculation,  and  the  future  payments  to  be 
treated  as  if  immediately  due.1 

§  155.  To  the  sum  thus  found  must  be  added  any  arrear- 
ages, fines,  and  other  charges  standing  against  the  borrower, 


1  Mosley  v.  Baker,  6  Hare,  87;  12 
Jur.  551 ;  17  L.  J.,  Ch.  257  (affirmed 
on  appeal,  1  Hall  and  T.  801;  13 
Jur.  817-  18L.  J.,Ch.  457;3DeG., 
Mac.  and  G.  1032);  Fleming  v.  Self, 
8  De  G..  Mac.  andG.  997;  3  Eq.  R. 
14;  1  Jur.,  N.  S.  25;  24  L.  J.,  Ch. 
29  (substituting  and  insisting  upon 
"possible"  for  "probable"  dura- 
tion); Smith  v.  Pilkington,  1  De  G., 
F.  and  J.  120;  29  L.  J.,  Ch.  227; 
Farmer  v.  Smith,  4  H.  and  N.  196;  5 
Jur.,  N.  8.  533,  n.;  28  L.  J.  Exch. 
226;  Sparrow  v.  Farmer,  26  Beav. 
511;  5  Jur.,  N.  S.  530;  28 L.  J.,  Ch. 
537;  33  L.  T.  216;  Handley  v.  Far- 
mer, 29  Beav.  362 ;  Seagrave  v.  Pope, 
1  De  G.,  Mac.  and  G.  783;  15  Engl. 
L.  and  Eq.  477;  Hoboken  Building 
Association  «.  Martin,  2  Beas.  (N. 
J.)  428;  Somerset  County  Building 
Loan  and  Savings  Association  v. 
Vandervere,  3  Stock.  (N.  J.)  282; 
Mechanics'  Building  and  Loan  As- 
sociation of  New  Brunswick  «. 
Conover,  1  McCart.  (N.  J.)  219  (not 
reversed,  in  this  particular,  in  2  C. 
E.  Gr.  497);  City  Building  and  Loan 
Co.  v.  Fatty,  1  Abb.  App.  Dec.  (N. 
Y.)  347;  Citizens'  Mutual  Loan  and 
Accumulating  Fund  Association  ». 
Webster,  25  Barb.  (N.  Y.)264;  Rob- 
ertson v.  The  American  Homestead 
Association,  10  Md.  397;  Shannon  a. 
The  Howard  Mutual  Building  Asso- 
ciation of  Baltimore,  36  Md.  383; 
Lister  v.  The  Log  Cabin  Building 
Association,  38  Md.  115;  McCahan 
t.  The  Columbian  Building  Asso- 
ciation of  East  Baltimore,  40  Md. 
226;  Henmghausen  and  Wolff, 
Rec'rs,  v.  Tisher,  50  Md,  583;  Ha- 
german  et  al.  v.  The  Ohio  Building 
and  Savings  Association,  35  Ohio 


St.  186;  Risk  v.  Delphos  Building 
and  Savings  Association,  31  Ohio 
St.  517;  Cincinnati  German  Build- 
ing Association  No.  3  v.  Flach  et  al., 
1  Rep.  (Cine.  Super.  Ct.)  468;  Win- 
Chester  Building  Association  n.  Gil- 
bert et  al.,  23  Grattan  (Va.),  787. 
See  also  Richards  v.  The  Bibb 
County  Loan  Association,  24  Ga. 
198;  Ocmulgee  Building  and  Loan 
Association  v.  Thomson,  52  Ga.  427 
(under  which  the  borrower  must  pay 
back  the  money  he  got  with  such  an 
advance  as  will  enable  the  company, 
at  the  lower  or  higher  rates  prevail- 
ing, to  get  the  same  monthly  interest 
upon  it  as  he  ought  to  pay  at  the 
same  rates  he  got  it  at).  Overby  and 
wife  v.  The  Fayetteville  Building 
and  Loan  Association,  81  N.  Car. 
56;  Hoskins  v.  Mechanics' Building 
and  Loan  Association,  84  N.  Car. 
838  (which  indicates  a  rule  of  set- 
tlement upon  the  basis  of  a  mere 
loan,  and  subsequent  partial  pay- 
ments); Hekelnkaemper  v.  The  Ger- 
man Building  and  Savings  Aasocia- 
tion,  22  Kas.  549;  followed  in  Glynn 
etal.  v.  Home  Building  Association, 
22  Kas.  746  (in  which  the  rule  in 
text  was  held  inapplicable,  the  trans- 
action being  regarded  as  a  mere  loan 
of  so  much  money,  to  be  returned). 
Watkins  r.  The  Workingmen's 
Building  and  Loan  Association  of 
Hyde  Park,  38  Leg.  Int.  (Pa.)  333; 
10  W.  N.  C.  414;  97  Pa.  St.  514, 
(which,  so  far  as  it  relates  to  volun- 
tary repayments,  proceeds  upon 
statutory  provisions,  and  as  for  the 
rest,  treats  the  transaction  as  a  loan 
which  must  be  repaid,  but  to  which 
the  borrower  may  apply  his  stock 
payments  already  made). 


§  157.]  RIGHTS   OF   MEMBERS.  191 

if  the  society  is  willing  not  to  make  the  fact  of  there  being 
such  an  insuperable  objection  '  to  permitting  the  member  the 
advantage  of  this  arrangement,  or  does  not  insist  upon  requir- 
ing their  previous  payment  by  him,  as  it  has  a  perfect  right 
to  do,  in  the  case  of  repayments  of  advances,  as  well  as  in  the 
case  of  withdrawing  members. 

§  156.  The  rule  just  indicated  recognizes,  by  necessary 
implication,  two  highly  important  principles  concerning  the 
rights  of  borrowing  members,  viz. :  (1)  that,  in  striking  the 
account  between  the  borrowing  member  and  the  association, 
at  any  time  after  the  creation  of  the  indebtedness,  and  prior 
to  its  working  oil  in  the  natural  course  of  the  scheme,  the 
member  is  to  be  credited  with  all  his  periodical  payments,  on 
account  of  stock  and  interest ;  (2)  that  he  is  to  be  credited 
only  with  his  actual  payments,  and  not  with  any  profits 
thereon,  (unless  special  statutory  enactment  or  the  rules  of  the 
society  allow  him  some  share  of  profits.)  The  first  of  these 
principles  clearly  appears,  when,  remembering  that  the  mort- 
gage is,  upon  its  face,  given  to  secure  a  series  of.  small  pay- 
ments,3 the  borrower  is  allowed  to  satisfy  it  upon  payment  of 
the  instalments  likely  to  be  coming  due  between  the  date 
when  he  desired  to  pay  off,  and  the  termination  of  the  society, 
claiming  credit,  as  to  all  that  precedes  that  date,  on  the  score 
of  his  former  payments.  The  second  proposition  follows  as 
closely  as  the  former.  The  whole  undertaking  calling  for  the 
payment  of  a  series  of  items,  and  the  undertaker  having  made 
payment  of  a  number  of  them,  he  is  allowed  credit  for  that 
number.  With  the  profits  they  have  been  making,  he  has 
nothing  to  do,  because  for  that  the  society  is  accountable  only 
upon  its  dissolution,  and  then  only  to  those  who  have  per- 
severed in  its  membership.8  Similarly,  he  gets  credit  for  tho 
interest  he  paid,  but  not  for  the  gains  the  association  may 
have  made  by  throwing  it  into  the  general  fund  and  re-m vest- 
ing it. 

§  157.  Nor  does  the  fact  that  the  security  given  to  the 
building  association  is  for  a  definite  sum,  rather  than,  as  is 
more  proper,  for  the  payment  of  dues,  etc.,  make  any  practi- 

!   Davis,  Law  of  Building,  etc.,     Homestead    Association,    10    Md. 
Societies,  p.  249.  397. 

•  Robertson   v.    The    American        s  See  ante,  §§  128-129. 


192  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [CH.  VII. 

cal  difference  in  the  application  of  these  principles.  In  such 
case,  the  sum  merely  indicates  the  part  of  the  ultimate  value 
of  the  shares  advanced  upon,  which  shall  be  applied  to  the 
extinguishment  of  the  debt  upon  the  final  account,  the  mem- 
ber being  entitled  to  any  surplus,  an  apparent  advantage, 
which  is  practically  no  advantage  at  all,  as  the  sum  loaned 
and  the  ultimate  value  of  the  share  are,  upon  presumption, 
the  same  amount.  The  periodical  contributions,  and  the  in- 
terest, are  fixed,  and  their  regular  payment  stipulated.  The 
period  of  their  continuance  is  no  more  and  no  less  certain  in 
the  one  case  than  in  the  other.  If  the  sum  is  fixed,  it  is  much 
easier  to  say  at  any  given  time  how  much  it  will  take  to  dis- 
charge the  debt.  But  it  is  merely  the  ascertained  aggregate 
of  a  certain  number  of  periodical  dues.  For  those,  therefore, 
which  he  has  paid,  and  for  the  interest  he  has  paid, — but  only, 
for  what  he  has  actually  paid,  without  any  profits,  can  the 
borrower  (independently  of  any  rule  or  law  giving  him  more) 
claim  credit.1 

Voluntary  Repayment  Under  the  Provisions  of  the  Articles.    English 
Decisions. 

§  158.  But  the  rules  of  the  society  may  be,  and  frequently 
are,  such  as  to  entitle  the  repaying  borrower  to  a  certain 
proportion  of  the  profits  made  upon  his  past  contributions, — 
u  provision  as  politic  as  it  is  just,  and  in  every  way  com- 
mendable upon  the  same  principles  of  expediency  and  equity 
which  govern  in  the  case  of  voluntary  withdrawals.*  The 
cases  which  define  the  rights  of  repaying  borrowers  most 
clearly,  and  which  are  the  leading  authorities  upon  this  point, 
arose  in  England. 

§  159.  Mosley  v.  Baker 8  was  the  first  case  on  the  subject. 
There  a  rule  of  the  society  provided,  "  that  if  any  member  of 
this  association  shall  be  desirous  of  paying  off  and  redeeming 
any  security  or  securities  which  he  shall  have  given  to  this 

1  Watkins  r.Workingmen's  Build-  *  See  ante,  §  127. 

ing  Assoc.,  38  Leg.  Int.  (Pa.)  333;  »  12  Jur.  551 ;  S.  C.,  10  L.  T.  Rep. 

10  W.  N.  C.  414;  97  Pa.  St.  514;  Me-  461 ;  6  Hare,  87;  17  L.  J..  Ch.  25;  ott 

chanics"  Building  and  Loan  Assoc.  appeal,  18  Id.  457;  13  L.  T.  Rep. 

of  New  Brunswick   T.  Conover,  1  317;  13  Jur.  317;  1  Hall  and   Tw. 

McCart.  (N.  J.)  219  (not  disturbed  301 ;  also,  27  Engl.  L.  and  Eq.  512. 
in  this  particular  in  2  C.  E.  Gr.  497). 


§  1 J9.]  RIGHTS   OF   MEMBERS. 

association,  and  shall  give  notice  of  such  his  desire  to  the 
manager,  the  directors  shall  allow  such  member  the  profits  of 
his  share  or  shares  made  up  to  such  a  time,  and  shall  make  a 
deduction  of  such  profits,  and  of  the  amount  of  subscriptions 
paid  in  by  such  member,  from  the  full  amount  expressed  to 
be  secured  in  and  by  the  mortgage ;  and  the  directors  are 
hereby  authorized  and  empowered  to  receive  the  balance, 
either  in  one  payment  or  in  such  instalments  as  the  directors 
and  the  members  shall  agree  upon  ;  and  upon  payment  of  the 
balance,  together  with  all  fines  due  in  respect  of  such  share 
or  shares,  the  directors  shall  authorize  the  trustees,  to  deliver 
all  deeds  and  other  documents  in  their  custody  relating  to  the 
mortgage  so  redeemed  by  the  member,  and,  at  his  cost,  en- 
dorse a  receipt  or  acknowledgment  of  payment  on  such 
mortgage,  according  to  6  and  7  Will.  4,  C.  32."  Mosley  be- 
came an  advanced  member  of  the  association,  and  executed  a 
mortgage  deed,  whereby,  after  reciting  that  the  plaintiff  was, 
according  to  the  rules  of  the  association,  entitled  to  receive 
out  of  the  funds  thereof  a  certain  sum,  it  was  witnessed,  that, 
in  consideration  of  sucli  sum,  he  assigned  to  the  trustees  the 
property  in  question,  to  secure  the  monthly  subscriptions, 
etc.,  upon  the  following  trusts :  "  Upon  trust,  if  G.  Mosley,, 
his  heirs,  executors,  administrators,  and  assigns  do  and  shall 
from  time  to  time  duly  pay,  observe  and  perform  all  the 
subscriptions,  payments,  redemption  moneys  and  regulations 
on  his  and  their  part  to  be  paid,  observed  and  performed,  ac- 
cording to  the  articles  of  the  association,  in  respect  of  the  said 
twelve  and  a  half  shares,  to  permit  G.  Mosley,  his  heirs,  etc.,, 
to  hold  and  enjoy  the  said  hereditaments  and  premises,  ami: 
to  receive  the  rents  and  profits  thereof  for  his  and  their  own 
benefit;  but  if  G.  Mosley  should  fail  for  six  monthly  nights 
to  make  and  pay  all  or  any  of  the  subscriptions,  payments 
and  redemption  moneys,  or  to  observe  or  perform  all  or  any 
of  the  regulations  on  his  or  their  parts  to  be  paid,  observrJ 
or  performed,  or  neglect  to  keep  the  premises  in  repair,  or  to 
pay  the  rent,  or  to  observe  and  perform  all  the  covenants  in 
the  lease,  or  in  case  the  said  G.  Mosley  should  become  bank- 
rupt or  insolvent,  then  and  in  any  or  either  of  the  said  cases 
it  shall  be  lawful  for  the  trustees  of  the  said  association  to 
appoint  a  person  to  collect  the  rents  and  profits  thereof,  and 


194  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  VII. 

thereout  to  pay,  satisfy  and  effect  all  the  purposes  aforesaid ; 
but  in  case  the  rents  and  profits  of  the  premises  shall  he  in- 
sufficient to  satisfy  the  purposes  aforesaid,  then  upon  trust 
that  the  trustees,  with  or  without  the  concurrence  of  the 
mortgagor,  shall  sell  the  said  premises."  The  trusts  of  the 
money  to  arise  from  such  sale  were  declared  to  be,  first,  to 
retain  and  pay  all  expenses  of  executing  the  trust ;  then  to 
retain  for  the  association  "  all  such  subscriptions  and  other 
payments  as  shall  be  then,  or  shall  hereafter  become  due  and 
owing  and  payable  in  respect  of  the  said  shares  by  him,  the 
said  G.  Mosley,  his  executors,  etc.,  calculating  the  probable 
duration  of  the  said  association,  it  being  hereby  declared  and 
agreed  that,  in  case  such  sale  as  aforesaid  shall  take  place,  all 
moneys  which  shall  at  any  time  afterwards  become  due  in 
respect  of  the  said  shares,  shall  be  considered  as  due  at  the  time 
of  such  sale,  and  that  the  same  shall  be  fully  deducted  and 
paid  out  of  the  moneys  received  by  virtue  of  the  aforesaid 
powers  or  trusts,  and  that  the  said  trustees,  or  the  board  of 
directors  of  the  said  association,  shall  calculate  the  amount 
accordingly,"  and  upon  trust  to  pay  the  surplus,  if  any,  to 
the  mortgagor,  his  heirs  and  assigns.  The  deed  then  con- 
tained the  usual  clause,  that  the  receipts  of  the  trustees  should 
be  a  sufficient  discharge,  and  a  covenant  by  G.  Mosley  to 
make  the  payments  and  observe  the  regulations  prescribed 
by  the  articles  of  the  association  in  respect  of  his  shares  as 
aforesaid ;  and,  also,  that  if,  upon  the  sale  of  the  property 
under  the  trusts  thereinbefore  contained,  any  loss  should  arise 
to  the  said  association,  the  said  G.  Mosley,  his  heirs,  etc., 
should  make  good  and  pay  the  deficiency  to  the  said  associa- 
tion. He  having  become  in  arrears,  the  trustees  exercised  the 
power  of  sale  in  respect  of  part  of  the  premises  comprised  in 
the  mortgage.  Mosley  then  made  a  tender  to  pay  a  certain 
sum  to  redeem,  which  was  refused,  except  as  on  account. 
Upon  a  bill  to  redeem,  praying  that  an  account  might  be 
taken  of  what  was  due  to  the  defendants,  the  trustees,  on  the 
mortgage  security ;  and  that  it  might  be  declared,  that,  in 
taking  such  account,  he  ought  not  to  be  charged  with  any 
sums  for  redemption  moneys,  subscriptions,  fines,  or  other 
payments  on  his  said  shares  accruing  after  such  tender,  the 
plaintiff  offering  to  confirm  the  sale  that  had  been  made,  and 


§  160.]  UKiilTS    OF    MEMBEKS.  195 

to  pay  what  should  be  found  due  from  him ;  and  that,  upon 
such  payment,  the  trustees  might  endorse  a  receipt  or  ac- 
knowledgment upon  the  mortgage  deed  according  to  the 
62d  rule;  the  trustees,  by  their  answer,  insisted  that  the 
plaintiff  could  not  redeem  the  property  except  upon  payment 
of  all  the  future  subscriptions,  etc.,  and  that  the  price  of  the 
redemption  must  be  ascertained  upon  the  same  principle  as 
was  provided  by  the  mortgage  deed  in  case  of  a  sale  of  the 
premises  by  the  association  in  consequence  of  the  default  of 
the  mortgagor.  The  Vice-Chancellor  (Wigram)  decided  in 
favor  of  the  claim  of  the  association,  and  the  order  eventually 
was  for  the  master  to  ascertain  the  full  value  of  the  plaintiff's 
future  contributions  according  to  the  terms  of  the  deed.  This 
decision  was  afterwards  affirmed.1 

§  160.  In  Seagrave  v.  Pope  *  the  rules  and  security  were 
very  much  in  the  same  terms  as  in  Mosley  v.  Baker.  The 
mortgage  deed  contained  no  covenant  or  stipulation  for  the 
repayment  of  the  money  advanced  to  the  borrower  upon  his 
shares ;  and  the  articles  of  the  society  provided,  that,  at  the 
termination  of  the  society,  the  mortgage  should  be  endorsed 
as  satisfied,  without  contemplating  the  repayment  of  the  ad- 
vance made.  The  rule  which  provided  for  the  case  of  an  ad- 
vanced member  being  desirous  to  redeem,  was  nearly  the 
same  as  that  in  Mosley  v.  Baker,  above  set  out.  Lord  Truro, 
L.  C.,  held,  that  an  advance  made  to  the  plaintiff  upon  his 
shares  was  not  a  loan,  but  an  anticipatory  payment,  by  way 
of  discount,  of  the  shares  he  would  otherwise  have  been  en- 
titled to  at  the  termination  of  the  society ;  and  that  the  deed 
was  to  secure  his  future  subscriptions,  etc.,  until  that  period, 
and  that  he  was  not  entitled  to  redeem  upon  the  terms  of  re- 
payment of  the  advance,  minus  the  amount  of  subscriptions 
paid  by  him  up  to  the  notice  to  redeem ;  and  the  bill  was  dis- 
missed, on  the  ground  that  the  plaintiff  was  bound  to  continue 
his  payments  until  every  member  had  satisfied  his  shares, 
there  being  no  covenant  for  repayment,  or  proviso  for  redemp- 
tion, in  the  deed.  This  case  is  considered  to  have  decided 
that  the  member  could  only  redeem  upon  payment  of  his 

1  18  L.  J.,  Ch.  457;  S.  C.,  13  L.      1099;  19  L.  T.  Rep.  173;  20  Id.  158; 
T.  Rep.  317;  1  H.  and  T.  301.  1  De  G.,  M.  &  G.  783;  15  Engl.  L. 

8  22  L.  J.,  Cb.  258;  S.  C.,  16  Jur.     and  Eq.  477. 


196  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  VII. 

subscriptions  down  to  the  end  of  the  estimated  duration  of 
the  society,  and  not  that  the  member  was  unable  to  redeem 
upon  any  terms.1  If  this  be  correct,  the  reason  for  the  bill 
having  been  dismissed  may  have  been  that  the  plaintiff  did 
not,  by  the  bill,  submit  to  redeem  upon  any  terms  the  court 
might  think  just,  but  prayed  to  be  declared  entitled  to  re- 
deem upon  certain  terms  specified  by  himself.  But,  however 
this  may  have  been,  in  a  case,  decided  shortly  afterwards  upon 
the  same  rules,  it  was  held  that  the  member  had  a  right  to  re- 
deem. 

§  161.  The  case  in  question  was  that  of  Fleming  v.  Self* 
and  the  plaintiff,  Fleming,  had  been  one  of  the  plaintiffs  in 
Seagrave  v.  Pope,  in  respect  of  another  mortgage  to  the  same 
society.  This  being  the  leading  case  on  the  subject,  it  will 
be  desirable  to  examine  it  with  some  carefulness. 

By  the  14th  rule  it  was  provided,  that,  if  any  member 
should  be  desirous  of  satisfying  the  securities  which  should 
have  been  given  for  any  shares  which  he  might  have  pur- 
chased, and  should  give  notice  of  such  desire  then  that  the 
directors  should,  within  one  month,  award  him  the  same  pro- 
portion of  profit  per  share  as  was  allowed  on  the  withdrawal 
of  unpurchased  shares ;  and  the  directors  should  make  a  de- 
duction of  such  profits  and  of  the  amount  of  subscriptions 
paid  in  by  such  member  from  the  full  amount  expressed  to 
be  secured  in  and  by  the  mortgage ;  and  the  directors  were 
thereby  authorized  to  receive  the  same  in  one  payment,  or  by 
such  instalments  as  the  directors  and  members  should  agree' 
upon ;  and  upon  the  payment  of  the  balance,  together  with 
all  fines  and  other  sums  due  in  respect  of  such  shares,  the  di- 
rectors should  desire  the  trustees  to  deliver  up  all  deeds,  etc., 
and  endorse  a  receipt,  etc.  By  the  33d  rule,  "  When  all 
the  payments  ni;.i.i'ioned  in  the  rules  hereinbefore  contained, 
that  is  to  say,  when  the  full  sum  of  £100  for  each  share,  with 
all  other  expenses  and  liabilities  of  the  society,  shall  be  fully 
paid  and  satisfied,"  the  society  should  then  cease.  By  the 
16th  rule,  members  wishing  to  withdraw  unpurchased  shares 

1  See  24  L.  J.,  Ch.  81.  3  De  G.,M.  &  G.  997;  on  appeal  from 

*24  L.  T.  Rep.  101;  18  J.  P.  772;  the  Vice-Chancellor's  decision,  re- 

S.  C..  24  L.  J.,  Ch.  29;  1  Jur.,  N.  ported  Kay,  518;  18  J.  P.  296;  23 

S.  25;  3  Eq.  Rep.  14;  3  W.  R.  89;  L.  T.  Rep.  63. 


§  162.]  EIGHTS   OF   MEMBERS.  197 

were  to  be  a/lowed  such  bonus  upon  withdrawal  as  the  di- 
rectors should  from  time  to  time  appoint.  The  plaintiff  be- 
came an  advanced  member,  and  subsequently  the  directors 
passed  a  resolution  that  the  society  should  tenriinate  and  its 
affairs  be  wound  up  after  the  period  of  eleven  years  from  its 
foundation.  Several  meetings  of  the  society  were  held,  and 
it  was  resolved,  that  the  bonus  or  share  of  profits  to  be  al- 
lowed to  withdrawing  members  should  be  .£32  per  share. 
At  the  end  of  the  term  of  eleven  years  from  the  foundation 
of  the  society,  the  plaintiff  gave  notice  to  withdraw,  and 
claimed  to  have  the  bonus  awarded  to  him,  and  to  have  his 
security  discharged  without  any  further  payment  on  his  part. 
In  reply,  after  consideration,  the  trustees  told  the  plaintiff 
that  he  could  not  be  allowed  any  bonus  or  share  of  profits  on 
his  shares,  nor  could  he  be  allowed  to  redeem  upon  any  other 
terms  than  the  payment  of  £180,  that  sum  being  the  calcu- 
lated amount  payable  by  him  from  the  time  of  his  giving  no- 
tice to  redeem,  down  to  the  estimated  period  of  the  society's 
termination.  The  plaintiff  then  filed  the  claim,  praying  a 
decree  for  redemption  and  the  delivery  up  of  his  title-deeds 
without  any  further  payments  being  made,  and  also  praying 
a  declaration  that  he  was  entitled  to  the  amount  of  bonus 
which  he  had  sought,  and  for  payment  of  the  same.  It  was 
eventually  held,  that  the  plaintiff  could  only  redeem  upon  the 
terms  of  paying  the  amount  of  subscriptions  and  redemp- 
tion money,  which  would  become  payable  by  him  during  the 
longest  period  that  the  society  could  possibly  last,  having  re- 
gard to  the  state  of  its  assets ;  but  that  he  was  entitled  to  the 
same  share  of  profits  as  would,  at  the  time  of  his  notice,  have 
been  payable  to  a  withdrawing  member  under  the  rules.  As 
to  this  last  order,  the  Lord  Chancellor,  in  making  it,  varied  the 
decree  of  the  court  below,  where  the  Vice-Chancellor  had  de- 
cided that  the  plaintiff  was  not  entitled  to  any  share  of  the 
profits. 

§  162.  In  Archer  v.  Harrison l  the  question  involved  was 
precisely  the  same  as  that  which  arose  in  Fleming  v.  Self, 
namely,  the  right  of  a  borrowing  member,  when  he  redeems, 
to  the  benefit  of  any  bonus  that  had  been  declared  on  the 

1  3  Jur.,  N.  8.  194;  S.  C.,  21  J.  P.  515;  7  De  G.,  M.  &  G.  404;  29  L. 
T.  Rep.  71. 


198  THE   LAW  OF  BUILDING  ASSOCIATIONS.      [CH.  VII. 

shares  prior  to  the  notice  to  redeem,  and  the  rules  were  simi- 
lar in  all  respects.  A  bonus  of  £23  per  share  had  been  de- 
clared in  April,  1849,  that  was,  prior  to  the  decision  of  the 
Lord  Chancellor  in  Fleming  v.  Self,  and  upon  the  assumption 
that  borrowing  members  were  not  entitled  to  participate  in 
the  bonuses.  The  calculation  was  consequently  erroneous ; 
and  accordingly,  after  the  decision  in  Flemings.  Self,  but  sub- 
sequently to  the  plaintiffs  notice  to  redeem,  the  directors 
made  another  calculation,  and  determined  that  £7  per  share 
was  the  proper  amount  of  the  bonus,  in  order  to  enable  the 
directors  to  pay  all  borrowing  members,  subsequently  coming 
to  redeem,  the  same  bonus  of  £7  per  share.  The  defendants 
offered  the  plaintiff  this  bonus,  but  he  declined  to  take  it, 
contending,  that,  upon  the  principle  of  Fleming  v.  Self,  he 
was  entitled  to  the  amount  of  bonus  declared  prior  to  his 
giving  notice  to  redeem.  The  Lord  Chancellor  held  that  he 
was  entitled  to  the  actual  bonus  declared,  namely,  £23  per 
share,  saying,  "  The  rule  being  implicit,  I  cannot  say  that 
the  plaintiff  is  not  to  have  the  bonus  which  has  been  declared ; 
but  the  amount  ultimately  to  come  to  him  will  be  diminished 
to  some  extent  by  the  payment  of  the  entire  monthly  and 
other  charges  in  consequence  of  the  prolongation  of  the  ex- 
istence of  the  society." 

§  163.  Smith  v.  Pilkington :  was  another  redemption  suit. 
Smith,  in  1846,  became  a  borrowing  member  of  "  The  Glouces- 
tershire and  Cheltenham  Accumulating  Fund  and  Mutual 
Benefit  Society,"  the  rules  in  which  were  similar  to  those  in 
Iteming  v.  Self.  In  July,  1855,  a  bonus  of  £25  per  share 
was  declared  by  the  directors.  Prior  to  June,  1856,  Smith 
gave  notice  of  his  intention  to  redeem  his  securities,  in  ac- 
cordance with  the  rules  of  the  society.  In  July,  1856,  meet- 
ings of  the  society  were  held,  Smith,  who  was  a  director, 
being  present,  at  which  redemption  of  the  securities  was  pro- 
posed upon  certain  terms,  and  all  the  borrowing  members, 
some  of  whom  Smith  had  consulted,  applied  to  redeem,  and 
subsequently  did  redeem,  on  the  terms  of  the  resolutions 
passed  at  these  meetings.  Smith,  however,  refused  to  adopt 
these  terms,  and  filed  a  bill  against  the  trustees  of  the  society, 

1  4  Jur.,  N.  S.  58;  30  L.  T.  Rep.      29  L.  J.,  Ch.  227:  1  De  G.,F.  &  J, 
196;  22  J.  P.  5;  S.  C.,  on  appeal,      120;  24  J.  P.  227. 


§  1G4.]  RIGHTS   OF   MEMBERS.  199 

whereby  he  prayed  that  it  might  be  declared  that  he  was,  on 
the  24th  of  October,  1856,  on  redeeming  his  mortgage  secur- 
ity, entitled  to  the  bonus  of  £25  per  share  on  each  of  his 
shares  in  the  society ;  that  certain  accounts  might  be  taken, 
and  the  plaintiff  credited  with  the  amount  of  the  said 
bonuses ;  that  the  defendants  might  be  decreed  to  pay  to  the 
plaintiff  out  of  the  funds  of  the  society  what,  upon  taking 
the  accounts,  should  appear  to  be  payable  on  redeeming  his 
mortgage  security,  with  interest,  etc.  The  defendants,  the 
trustees  of  the  society,  contended  that  Smith  was,  by  his  con- 
duct, precluded  from  redeeming,  except  upon  the  terms  pro- 
posed at  the  above-mentioned  meetings,  and  granted  to  all 
the  other  borrowing  members  who  had  retired  or  withdrawn. 
But  the  Vice-Chancellor  held  that  the  plaintiff  was  not  bound 
by  the  resolutions  of  July  and  the  terms  granted  to  the  retir- 
ing members ;'  that  there  was  no  new  agreement  entered  into 
between  Smith  and  the  directors ;  and  therefore  that  the  plain- 
tiff was  entitled  to  the  relief  prayed  for,  the  accounts  to  be 
taken  upon  the  principle  of  the  decision  in  Fleming  v.  Self.3 
§  164.  In  Farmer  v.  Smith*  the  rule  for  redemption  pro- 
vided that  an  advanced  shareholder  might,  at  any  time,  satisfy 
the  security  by  paying  the  subscriptions  to  the  end  of  the 
thirteenth  year  of  the  society's  existence,  and  it  was  never 
doubted  but  what  he  had  power  to  do  so,  as  far  as  the  secur- 
ity of  the  land  was  concerned;  and  the  same  thing  v,-;is 
expressly  decided,  in  another  case,  in  equity.4  And  so,  if,  by 
the  rules,  a  period  is  fixed  for  the  termination  of  the  society, 
and  that  time  has  elapsed  without  the  objects  of  the  society 
having  been  accomplished,  the  member  will  nevertheless  1  >e 
entitled  to  have  his  property  discharged  from  the  mortgage, 
though,  as  we  shall  presently  see,  he  will  not  be  discharged 
from  his  covenant  to  pay  the  subscriptions.6 

1  See  Armitage  v.  Walker,  2  Jur.,  3  28  L.  J.,  Ex.  226;   S.  C..  32  L. 
N.  8.  13;  20  J.  P.  53;  S.  C.,  26  L.  T.  Rep.  371 ;  5  Jur.,  N.  S.533.  n. ;  4 
T.  Rep.  182;  2  Kay  &  J.  211.  II.  &  N.  196;  7  W.  R.  362. 

2  23  L.  T.  Rep.  63;  18  J.  P.  295;  4  IlnmlU'y    r.    Farmer,   29   Beav. 
Kay,  518;  S.  C.,  on  appeal,  24  L.  362. 

T.  Rep.  101;  18  J.  P.  772;  24  L.  J.,  5  Sparrow  73.    Farmer,    28  L.  J., 

Ch.  29;  1  Jur.,  N.  S.  25;  3  De  G.,  Ch.  537;  S.  C.,  5  Jur.,  N.  S.  530;  33 

M.  &  G.  997;  3  Eq.  Rep.  14;  3  W.  L.  T.  Rep.  216;  26  Beav.  511 ;  23  J. 

R.  89.  P.  500. 


200  TUB   LAW   OF   BL'ILDIM.    &880I  lAl'lON-.       [i.H.  VIL 

Importance  of  English  Cases  in  America.     Exception. 

§  1<»5.  These  decisions  form  the  groundwork  upon  which 
American  courts  have  framed  their  opinions  on  questions 
touching  the  rights  of  repaying  borrowers.1  They  are  im- 
portant particularly  as  defining  those  rights,  where  the  statute 
governing  the  formation  and  management  of  building  asso- 
ciations, or  the  rules  of  the  society  under  them,  fail  of  ade- 
quate and  clear  expression.  Their  principles  are  univer- 
sally applicable.  The  applicability,  however,  of  the  exact 
measure  laid  down  in  these  rules  may  be  superseded  by 
statutory  enactment,  or  constitutional  or  by-law  provisions 
of  the  association  itself,  which  have  become  a  part  of  the 
contract. 

§  166.  Thus,  in  Pennsylvania,  under  the  acts  of  1859 
and  1874,  a  borrowing  member,  voluntarily  repaying  his  loan, 
might  claim  a  rebate  upon  the  amount  payable,  of  one-eighth 
of  the  premium  he  contracted  to  pay,  for  every  unexpired 
year  of  the  association's  running,  within  eight.  If,  therefore, 
he  repaid  when  the  society  was  four  years  old,  it  having 
still  four  years  of  the  eight  before  it,  he  was  entitled  to  an 
allowance,  in  reduction  of  the  debt,  amounting  to  one-half 
of  the  premium  at  which  he  took  the  loan.2  But,  under 
such  a  rule,  in  computing  the  reduction,  only  whole  years 
can  be  counted,  and  no  claim  can  be  made  for  proportionate 
reductions  for  any  additional  fraction  of  a  year.*  Similar 
provisions  are  made  by  statute  in  other  States.4 

Construction  of  Provisions,  Favoring  Right  of  Repayment. 

§  167.  In  the  construction  of  provisions  regulating  the 
right  and  terms  of  repaying,  the  courts  favor  the  borrower. 
So,  under  a  provision  of  a  building  association's  constitution 
that  "  any  member  having  taken  a  loan,  may  obtain  a  release 
of  his  property  mortgaged  to  the  association,  by  paying  back 
to  the  association  the  difference  between  the  dues  paid  in, 
and  the  amount  borrowed,  together  with  a  bonus  of  $8  per 
share,  if  returned  in  the  first  year  of  the  working  of  the  asso- 
ciation ;  if  the  second,  $6 ;  if  the  third,  $5  ;  if  the  fourth, 

1  See  cases  under  note,  §  154,  p.  190.  8  Building  Association  v.  Rock,  9 

9  See  Act,  12  April,  1859;  Wrig-  Phila.  (Pa.)  75.    This  is  remedied, 

ley,  "Workingman's  Way  to  Wealth,  in    Pennsylvania,    by   the   Act    10 

pp.  64-65;    Act  April  29,  1874,  §  April,  1879,  g  4,  p.  17;  ante,  §  34  (J). 

37,  Cl.  5,  p.  98:  but  see  ante,  §  34  (j)  *  See  ante,  Ch.  ii. 


§  169.]  RIGHTS   OF    MEMBERS.  201 

$4 ;  if  the  fifth,  $3  ;  and  $3  thereafter,  and  their  proportion 
of  the  losses  the  association  may  have  sustained  during 
their  membership,  etc.,  if  returned  before  the  unredeemed 
shares  are  worth  $120," — it  was  held,  there  being  no  evi- 
dence of  such  losses,  and  the  offer  to  repay  being  made  in 
the  first  year,  that  the  proper  mode  of  ascertaining  the 
correct  amount  repayable,  was  to  deduct  the  amount  of  dues 
paid  in  from  the  amount  actually  borrowed,  and  to  this  add  a 
bonus  of  $8  on  each  share.1 

§  168.  Similarly,  in  another  case,  a  member  of  a  building  as- 
sociation had  given  a  bond  and  mortgage  conditioned  for  cer- 
tain periodical  payments  to  be  kept  up  until  their  aggregate 
should  amount  to  the  sum  loaned,  and  interest,  and  all  fines  and 
other  charges  against  the  shares  should  be  paid.  A  by-law 
provided  that  any  member,  wishing  to  pay  off  his  mortgage 
in  advance,  should  apply  to  the  directors,  who  should  "  decide 
the  amount  to  be  paid  by  the  mortgagor,"  upon  payment  of 
which  he  should  receive  a  discharge  and  release  of  the  mort- 
gaged property.  Upon  desiring  to  repay  it,  being  clear  of 
all  dues  and  fines,  before  the  termination  of  the  society,  it  was 
held  that  the  directors,  to  whom  the  member  applied,  could 
not  require  him  to  pay  more  than  the  sum  for  which  the  obli- 
gation had  been  given  (they  proposed  to  charge  an  additional 
bonus  for  the  privilege  of  premature  repayment),  adding  un- 
paid interest  thereon,  and  deducting  the  amount  of  monthly 
dues  already  paid,  without  interest,  and  making  no  deduction 
for  entrance  fees, — which  latter  were  said  to  be  more  prop- 
erly applicable  to  the  discharge  of  the  ordinary  expenses  of 
the  association,  than  to  be  considered  in  the  light  of  a  deposit 
or  payment,  to  be  afterwards  allowed  to  a  member  upon  any 
future  loan.* 

Rights  as  to  Repayment  at  Time  of  Loan  Cannot  be  Varied ;  but 
Special  Arrangements  Agreed  to  by  Members  Conclude  both 
Parties. 

§  169.  The  rights,  in  respect  of  repayment  or  redemp- 
tion, which,  at  the  time  of  obtaining  a  loan,  are  secured  t«> 
the  borrower  by  the  rule  then  in  force,  become  part  of  his 
contract,  and  cannot  be  .-iiW«]iiently  varied,  without  his  con- 

1  Oak  Cottage  Building  Associa-         *  Barker    v.    Bigelow,    15    Gray 
tion  v.  Eastman  and   Kodgers,  31     (Mass.),  130. 
Md.  556. 


202  THE   LAW   OF  BUILDING   ASSOCIATIONS.      [CH.  VII. 

sent.1  It  happens,  however,  occasionally,  that  especial  ar- 
rangements are  made,  outside  of  statute  and  by-law,  for  the  pur- 
pose of  inducing  borrowers  to  repay.  Whilst  no  arrangement 
of  this  kind,  which  is  inconsistent  with  his  existing  contract, 
can  be  forced  upon  the  borrower,  he  may  yet,  by  taking  ad- 
vantage of  it,  rid  himself  of  his  obligations  towards  the  soci- 
ety. And  although  such  arrangements  have  not  only,  in  most 
cases,  proved  short-sighted  and  disastrous  to  the  society,  but 
also,  under  certain  circumstances,  may  rest  under  grave  doubts 
as  to  their  legality,*  this  objection  is  practically  brushed 
aside  by  the  fact,  that,  if  ultra  vires,  they  come  strictly  under 
the  head  of  unauthorized  measures  affecting  only  the  inter- 
ests of  stockholders,  which  may,  therefore,  be  sanctioned  and 
made  operative  by  unanimous  consent  ;s  and,  further,  by  the 
doctrine  of  estoppel,  which  closes  the  mouths,  as  to  any  such 
objection,  of  the  members  benefiting  by  it,4  as  well  as  of 
the  corporation  offering  it.* 

§  170.  So,  where,  under  a  resolution  of  the  building  associa- 
tion permitting  borrowers  to  withdraw  on  payment  of  a  stip- 
ulated amount,  the  stock  to  be  then  "  withdrawn  and  can- 
celled," a  stockholder  withdrew,  paid  off  his  loan  and  stock, 
which  was  then  marked  on  the  books  "  cancelled  "  and  "  with- 
drawn," it  was  held  that  the  corporation  could  not  afterwards 
recover  for  dues  which  subsequently  accrued  thereon.  The 
position  of  the  parties  was  that  of  debtor  and  creditor ;  and 
after  an  acceptance  of  the  terms  of  the  resolution,  and  pay- 
ment by  the  debtor  of  the  sums  found  thereby  to  be  due,  the 
new  contract  was  executed,  and  a  case  of  accord  and  satisfac- 
tion was  made  out.  Besides,  having  enjoyed  the  benefit  of 
the  arrangement,  the  company  was  estopped  from  denying 
the  validity  of  the  resolution  under  which  it  was  done.8 
Similarly,  a  resolution  of  a  building  association,  providing 
that  the  value  of  all  stock  borrowed  on,  to  a  certain  amount, 
should  be  allowed  to  such  holders  as  wished  to  redeem,  can- 

1  In    re    Norwich    and   Norfolk  4  Hoboken  Building  Association 

Provident  Building  Society,  Smith's  v.  Martin,  2  Beas.  (N.  J.)  428. 

Case,  1  L.  R,  Ch.  Div.  481;  45  L.  *  Miller  v.  Jefferson  Building  As- 

J.,  Ch.  Div.  143;  24  W.  R  103.  sociation,  50  Pa.  St.  32. 

9  But  see  post.  §  323.  6  Miller  v.  Jefferson  Building  As- 

3  Kent  T.  Quicksilver  Mining  Co.,  sociation,  supra. 
78  X.  Y.  139. 


§1  72.]  RIGHTS  OF  MEMBERS.  203 

not  be  rescinded  to  the  prejudice  of  an  ex-member  who  has 
made  application  to  withdraw,  and  had  refrained  from  making 
his  monthly  payments,  in  the  belief  that  his  application  had 
been  accepted.1 

Member  Cannot  Claim  Benefit  of  Special  Arrangement,  Unless  He 
Consent  to,  and  Carry  Out,  its  Terms;  Except  where  Value  of 
Stock  Changed  with  a  View  to  Dissolution,  etc. 

§  171.  These  measures  being,  however,  in  point  of  legal 
efficacy,  nothing  but  offers  of  compromise,  as  they  cannot 
bind  members  against  their  will,  so,  in  order  to  benefit  them, 
must  be  assented  to,  and  acted  upon,  by  them,  according  to 
their  spirit  and  purpose.  Hence,  where  the  officers  of  a 
building  association  had  passed  a  resolution  to  the  effect  that 
borrowing  stockholders  should  be  permitted  to  cancel  their 
obligations  upon  payment  of  all  arrears,  and  monthly  dues, 
as  many  months  in  advance  as  would  be  required  to  make 
the  duration  of  the  society  100  months ;  in  a  subsequent  con- 
troversy between  the  building  association  and  a  borrower, 
who  had  not  at  the  time  made  the  payment  demanded  by  the 
resolution,  it  was  held  that  he  could  not  avail  himself  of  its 
privileges.2  There  was  here  evidently  no  acceptance  of  the 
modification  of  his  contract  by  the  borrower,  but,  on  the  con- 
trary, a  neglect  of  his  plain  duties  as  a  member,  even  such  as 
they  were  before  the  proposed  plan  was  thought  of,  and  this  res- 
olution itself  clearly  applied  only  to  such  as  availed  themselves 
promptly  of  its  offer,  for  the  purpose  of  making  voluntary 
payment  of  their  debts.  The  object  of  the  arrangement 
seems  to  have  been  to  stimulate  the  cash  influx,  by  offering  a 
premium,  as  it  were,  upon  the  prompt  anticipation  of  the 
stipulated  period  of  payment ;  but  they  furnished  no  evi- 
dence of  an  intention  to  change  the  value  of  the  stock,  or  to 
make  a  permanent  and  sweeping  provision  for  the  computa- 
tion of  the  present  value  of  any  debt,  of  which  any  one  could, 
at  any  time,  avail  himself. 

§  172.  This  case  is  different  from  such  an  one  in  which 
the  arrangement  was  meant  to  be  a  final  one,  looking  towards 
a  dissolution  of  the  society  upon  the  basis  of  a  certain  value 

1  Eyre   n.   Building  Association,     Building  Association,  10  "W.  X.  C. 
17  Le£.  Int.  (Pa.)  148.  (Pa.)  414;  38  Leg.  Int.  333;  97  Pa. 

8   W;itkins      v.       Workingmcn's     St.  514. 


204  THE   LAW   OF    BUILDING    ASSOCIATIONS.       [CH.   VII. 


attrihuted  to  the  stock  by  the  resolution,  especially 
the  process  of  winding  up  had  been  carried  to  a  considerable 
extent  upon  that  basis.  Under  such  a  state  of  facts,  it  would 
be  unjust  to  require  any  one  member  to  pay  more  than  all 
the  rest,  and  it  could  not,  without  extensive  readjustment-, 
be  made  to  benefit  more  than  the  small  proportion  of  mem- 
bers whose  accounts,  being  still  unsettled,  would  l>e  swelled 
without  any  sort  of  reason  or  propriety,  and  to  their  manifest 
advantage  over  all  those  with  whom  the  association  had 
already  settled.  There  is  a  case  in  point,  decided  in  New 
Jersey.1  Trouble  arose  within  the  society  to  such  an  extent 
that  it  was  seen  to  be  impossible  to  carry  on  its  operation, 
and,  as  a  basis  for  winding  up,  it  was  agreed,  that  borrowing 
members  should  be  discharged  of  their  obligations,  upon 
payment  of  what  they  had  actually  received,  less  their  paid 
instalments;  that  non-borrowers  should  receive  back  what 
they  had  paid  in,  with  interest,  and  that  thereupon  the 
building  association  should  be  dissolved.  Out  of  49  borrow- 
ing members  44  had  withdrawn  and  been  released  upon  these 
terms.  A  borrowing  member,  who  first  had  assented  and 
approved  the  scheme,  subsequently  repudiated  it,  and  was 
sued  by  the  society.  He  contended,  moreover,  that,  as  the 
society  had  departed  from  the  legal  measure  of  the  debt, 
and  pretended  to  enforce  against  him  a  settlement  clearly 
'ultra  vires,  he  was  discharged  of  all  liability  towards  it  in 
respect  of  the  loan  he  had  received  from  it.  T^he  reasoning 
of  the  court  was  substantially  as  follows  :  Independently  of 
the  arrangements  for  winding  up  the  affairs  of  the  association, 
the  defendant  would  be  bound  to  account  according  to  the 
condition  of  his  bond  until  tbe  tinie  fixed  or  properly  com- 
puted for  the  dissolution  of  the  association.  Whether  the 
arrangement  agreed  .upon  was  legally  within  the  powers  of 
the  building  association  to  pass  or  not,  the  illegal  conduct  of 
its  officers  could  not  relieve  the  defendant  from  his  obligation. 
He  would  then  be  left  to  the  terms  of  his  contract,  and, 
according  to  the  constitution  of  the  society  and  the  terms  of 
his  mortgage  deed,  he  would  be  entitled  to  redeem  only  upon 
payment  of  all  the  future  subscriptions  on  his  shares  until 
the  association  ceased.  But,  equitably,  the  defendant  was 
1  Hoboken  Building  Associution  T.  Martin,  2  Beas.  (N".  .T.)  428. 


§  ITo.]  KIGHTS   OF   MEMBERS.  205 

entitled  to  the  benefit  of  the  arrangement,  notwithstanding 
his  refusal  to  stand  by  it ;  nor  could  the  association  complain 
of  a  decree  upon  that  basis.  They  had  acted  and  were  acting1 
upon  it,  and  were  proceeding,  at  the  time,  to  wind  up  their 
affairs  according  to  its  terms  and  spirit.1 

Borrowing  Members  Cannot   Force  Terms   on  Investors,  Involving 
Continuance  of  Society. 

§  173.  On  the  other  hand,  it  is  quite  certain  that  the 
borrowing  portion  of  the  society's  membership  has  no  right, 
for  the  purpose  of  easing  its  burdens,  to  force  upon  the  in- 
vestors, if  these  happen  to  be  in  the  minority  and  in  opposi- 
tion, either  a  method  of  terminating  the  borrowers'  relations 
with  the  society,  involving  its  continuance  as  such,  or  one  of 
forced  withdrawal  of  the  investors.  And  in  such  matters, 
the  court,  if  appealed  to  for  interference,  cannot  assume  to 
control  the  discretion  and  judgment  of  members,  as  to  their 
own  interests,  or  the  most  beneficial  policy  to  be  pursued  by 
them  in  the  association,  but  must  accord  to  them  their  plain 
right  of  insisting  upon  the  proper  and  legal  carrying  on  of 
its  business.  Hence,  where  the  borrowers  had  resolved  to 
wind  up  the  affairs  of  an  association  upon  a  certain  basis,  as 
its  business  appeared  to  be  unprofitable  on  account  of  the 
inability  to  dispose  of  funds  on  hand,  an  injunction  was 
granted  at  the  instance  of  the  investors."  And  in  an  English 
case,  which  underwent  very  elaborate  consideration,  where 
the  directors  decided  "  not  to  receive  any  further  subscrip- 
tions from  investing  members,  but  to  consider  such  as  with- 
drawing members  in  future,  the  same  as  if  they  had  given 
notice  of  withdrawal,"  the  effect  of  which  was  intended  to 
be,  to  shake  off  all  but  the  borrowing  members,  with  a  view  to 
changing  the  nature  ot  the  society  into  a  freehold  land  soci- 
ety ;  Cockburn,  C.  J.,  says :  "  I  think  .  .  .  that  such  a  reso- 
lution was  inoperative,  and  that  investing  members  might 
insist  upon  paying  up  their  subscriptions  and  getting  the 
benefit  of  the  society,  unless  they  had  precluded  themselves 

1  An  agreement  of  the  stockhold-  tion  t>.  Kelley  et  al.,  9  Luz.  Leg. 

ers  to  wind  up  is  legal  (see  post,  Reg.  (Pa.)  9. 

§  475),  and  binds  a  member  who  has  J  Pfaff  v.  Building  Association,  6 

consented,  and  his  assignee;  White  W.  N.  C.  (Pa.)  349. 
Haven  Loan  and  Building  Associa- 


206  THE  LAW   OF  BUILDIXG   ASSOCIATIONS.        [CH.  VII. 

by  concurring  in  the  resolution  to  treat  themselves  as  with, 
drawing  members."1 

Repayment  upon  Decease  of  Borrowing  Member  and  Judicial   Sale 
of  Property. 

§  174:.  Thus  far,  we  have  examined  the  rights  of  a  bor- 
rowing member  upon  voluntary  repayment  of  his  loan.  It 
remains,  in  connection  with  this  subject,  to  consider  how  his 
rights  stand  upon  a  forced  repayment.  There  is,  however, 
one  case,  which  is  just  between  these  two  divisions.  It  is  the 
case  in  which  a  mortgage,  given  by  a  member  of  a  building 
association  to  it,  becomes  divested  and  repayable,  in  conse- 
quence of  a  judicial  sale  of  the  mortgaged  premises,  upon  the 
member's  decease.*  In  such  a  case,  there  is  neither  a  volun- 
tary act  of  the  borrower  in  repaying  the  loan,  nor  is  there 
any  fault  to  be  imputed  to  him  in  respect  of  it.  The  mort- 
gage is  divested  by  the  policy  of  the  law,  and  upon  the 
principle  actus  legis  neminem  injuriat,  it  has  been  held 
that  the  building  association  is  bound  to  make  the  same 
allowances  upon  the  mortgage,  as  if  the  borrower  had  elected 
to  pay  off  the  loan  and  withdraw.' 

Rights  of  Member  upon  Forced  Repayment  on  Default. 

§  175.  But  there  is  obviously  a  great  difference  between 
the  case  of  a  member  who  has  fulfilled,  faithfully,  all  the  re- 
quirements of  his  undertakings  with  the  building  association, 
— of  those  which  relate  to  the  duties  of  membership  generally, 
as  well  as  of  those  which  pertain  to  his  position  as  a  borrower, 
— and  that  of  a  member,  who,  after  obtaining  an  advance,  neg- 
lects both  classes  of  obligations,  and  renders  himself  liable  to 
compulsory  proceedings  on  the  part  of  the  society,  which  the 
latter  is  bound  to  institute,  all  the  more  rigorously,  as  the  suc- 
cess of  the  whole  scheme  depends  upon  the  exact  perform- 
ance of  all  his  duties  by  every  member.  Whatever,  there- 
fore, may  be  the  advantages  allowed  to  members  voluntarily 
repaying  their  loans,  these  provisions  have  no  application  and 
offer  no  immunities  to  those  who  become  defaulters,  and  are, 

1  Reg.  v.  D'Eyncourt,  116  Engl.  *  E.  g. ,  by  an  Orphan's  Court  Sale 

C.  L.  R.  (4  Best  &  Smith.  C.  B.)  in  Pennsylvania. 

820;  28  J.  P.  116;  9  L.  T.  Rep.,  N.  8  Suider's  Estate,    34  Leg.   Int. 

a  712;  12  W.  R.  408.  (Pa.)  49. 


§  176.]  EIGHTS    OF   MEMBEUS.  207 

upon  that  ground,  sued  by  the  association  upon  the  covenants 
of  their  obligations.  Having  thus  violated  the  rules  of  the 
society,  they  are  not  entitled  to  the  benefits  held  out  to  those 
who  keep  them,1  nor  are  they  within  the  meaning  of  the 
statute  designed  to  favor  conscientious  borrowers.2  All  that 
they  can  claim  as  against  the  building  association  is  the  right 
(which,  we  have  already  seen,  is  inherent  in  every  member  at 
all  times 3)  to  appropriate,  in  part-payment  of  their  obligations, 
the  actual  payments  they  have  already  made  by  way  of  sub- 
scriptions and  by  way  of  interest  upon  their  loans.4  But 
even  then  it  must  not  be  forgotten,  that,  as  members,  they 
were  liable  for  their  proportionate  share  of  the  expenses  and 
losses  of  the  concern,  and  that  this  share  is  to  be  reckoned 
against  them  as  part  of  their  mortgage  debt.6 

Borrower's  Membership  not  Necessarily  Forfeited  by  Suit  upon  De- 
fault.    Statement  of  Account  in  Equity. 

§  176.  A  borrower  does  not,  however,  necessarily  forfeit 
his  membership  by  being  sued  by  the  association.  Forfeiture 
does  not,  at  any  time,  take  place  without  being  declared  by 
the  society  against  the  member;  nor,  without  its  enforce- 
ment, does  the  cessation  of  his  membership  occur,  unless  in- 
sisted upon  by  him,  in  exercising  his  right  to  apply  his  stock 
in  part  payment  of  his  debt.  If,  without  either  of  these  con- 
tingencies arising,  the  building  association  makes  its  whole 
claim  out  of  the  mortgaged  premises,  it  would  be  highly  in- 
equitable to  insist,  in  addition,  upon  the  loss  of  his  interest.-? 
in  the  association.8  In  such  case,  therefore,  if  he  continues 
his  stock-payments,  he  continues  to  be  a  member,  and  en- 

1  Matterson  v.  Elderfleld,  4  L.  R,  Building  and  Loan  Association,  38 
Ch.  207;  17  W.R.  422;  20  L.  T.,  N.  Leg.   Int.  (Pa.)  333;  10  W.  N.  C. 
S.  503.     Hatherly,  L.  C.,  says:  "It  414;  97  Pa.  St.  514. 
is  true  that  the  right  to  sell  prevents  8  See  ante,  §§  127-131. 
the  right  of  redemption.     So  far,  it  4  See  ante,  §§  156-157. 
is  a  forfeiture,  but  not  otherwise.  4  McGrath    v.  Hamilton  Savings 
If  the  mortgagor  had  redeemed,  he  and  Loan   Association,  44  Pu.  St. 
would  have  had  an  abatement;  as  883;  Pattisou  v.  The  Albany  Build- 
he  1ms  not  done  so,  he  can  have  no  ing  and  Loan  Association,  63  Ga. 
such  benefit."    And  there  is  no  ilif-  873 

ference  as  to  this  principle  between  6  Massey  v.  The  Citizens'  Build- 

;i  permanent  and  a  terminating  so-  ing    and    Savings    Association    of 

ciety.  Paola,  22  Kas.  624. 

*  Watkins      v.       Workingmen's 


208  THE  LAW  OF  BUILDING   ASSOCIATIONS.      [CH.  VII. 

titled,  upon  the  final  distribution,  to  his  share  in  the  com- 
pany's profits. ' 

§  177.  Courts  of  equity,  upon  proceedings  to  foreclose, 
order  a  preliminary  account  to  be  taken  between  the  parties, 
ihowing  the  amount  actually  in  arrears  by  the  borrower. 
A-f  ter,  upon  this  basis,  the  account  is  stated  and  a  sale  ordered, 
tho  mortgagor  has  the  right  to  prevent  tlie  sale  by  the  pay- 
ment of  the  amount  thus  found,  and  the  decree  of  sale  stands 
as  a  continuing  security.  Should  he,  however,  fail  to  make 
such  payment,  and  the  mortgaged  property  be  converted 
into  money,  other  considerations  than  those  relating  to 
the  amount  then  due  would  arise  in  making  an  equitable 
distribution  of  the  fund  between  the  parties.11  This  is 
not  a  deviation  from  the  principles  already  laid  down ;  for 
the  accounts  indicated  are  preliminary  only,  and  the  proceed- 
ing has  the  effect  of  affording  the  borrower  an  opportunity 
of  saving  his  membership.8 

Tender.     Effect  of  Refusal  to  Accept  by  Society. 

§  178.  Whenever  a  member  is  in  such  a  position  as  will 
entitle  him  to  repay  his  loan,  whether  voluntarily  or  upon 
suit  brought,  the  building  association  is  bound  to  accept  his 
offer  of  what,  according  to  the  circumstances,  its  rules,  and 
the  statute  governing,  all  the  rights  of  both  parties  being  duly 

1   North  American  Building  As-  plios  Building  and  Savings  Associa- 

sociation  v.  Button,  35  Pa.  St.  463;  tion,   31   Ohio    St.   517;    Somerset 

Ocmulgee  Building  and  Loan  Asso-  County  Building,  Loan  and  Saving 

ciation  v.   Thomson,   52  Ga.   427;  Association  n.  Vandervere,  3  Stock. 

Overby  and  wife®.  The' Fay ettcville  (N.  J.)282;  Citizens'  Mutual  Loan, 

Building  and  Loan  Association,  81  etc.,  Association  v. "Webster,  25  Barb. 

N.  Car.  56.     See  also  Hekelnkaem-  (N.  Y.)  263. 

per  v.  The  German  Building  and  8  See  White  v.  The  Mechanics' 

Savings  Association,  22  Kas.   549;  Building  Association,  22  Grat.  (Va.) 

Richards  v.  The  Bibb  County  Loan  233,  for  validity  of  a  provision  in 

Association,   24  Ga.   198;  Hennig-  mortgage,  whereby,  in  cnse  of  de- 

hausen  and  Wolff,  Rec'rs,  v.  Tisher,  fault,  the  amount  payable  is  to  be 

50  Aid.  583.  ascertained  by  referees,  according 

8  Robertson    v.    The    American  to  the  value  for  which  shares  are 

Homestead  Association,  10  Md.  397.  then    selling.     An    injunction    im- 

See  Hagerman  et  al.  v.  The  Ohio  properly  obtained  should  not  be  clis- 

Building  and  Savings  Association,  solved,  however,  until  the  indebted- 

25  Ohio  St.  186;  Risk  v.  The  Del-  ness  is  ascertained. 


§  179.]  EIGHTS   OF   JJ  EMBERS.  209 

regarded,  is  coming  to  it  upon  his  obligation.  And  having 
made  such  offer,  the  borrower  is  in  the  situation  of  one  who 
has  made  a  lawful  tender  of  his  debt  actually  due.1  For,  al- 
though upon  mortgages  drawn,  as  is  the  custom  in  most  build- 
ing associations,  to  cover  merely  payments  of  certain  period- 
ical amounts  during  the  existence  of  the  society's  life,  or  the 
running  of  the  series,  it  can  scarcely,  in  strictness,  be  said  that 
such  an  offer  is  technically  a  tender ;  yet,  if  it  is  made  of  such 
terms  as  will  satisfy  all  just  claims  of  the  association  and 
make  a  suit  unnecessary,  it  amounts  to  a  tender.*  The  re- 
fusal of  the  corporation  to  accept  such  terms  will  stop  the 
running  of  interest  upon  the  debt ;  but  a  subsequent  agree- 
ment to  accept  will  start  the  running  of  intersst  as  if  no  ten- 
der had  been  made,  until  the  money  is  paid,  or  brought  into 
court.3  And  the  bringing  of  suit  upon  the  mortgage  by  the 
building  association  is  not,  of  course,  equivalent  to  a  refusal 
by  it  to  accept  interest ;  wherefore,  the  running  of  the  period 
of  grace  allowed  for  the  payment  of  arrears  is  not  suspended, 
while  a  prior  suit,  prematurely  brought  and  discontinued, 
was  pending.4 

Costs  in  Redemption  and  Foreclosure  Suits. 

§  179.  In  England,  where  the  borrower's  right  to  redeem 
his  property  from  the  mortgage  given  to  the  association  is 
enforced  by  a  bill  in  equity  brought  by  him  for  that  purpose, 
it  is  said  that  the  member  will  have  to  pay  all  the  costs  of 
such  proceeding,  unless  the  society  has  been  guilty  of  vexa- 
tious and  oppressive  conduct.6  The  same  principle,  mutatis 
mutandis,  must  apply,  where  the  suit  is  for  the  enforcement  of 
a  mortgage  by  the  association ;  remembering,  however,  that  a 
specific  tender  before  suit,  or  with  accrued  costs  after  its  com- 
mencement, and  refusal  by  the  plaintiff  to  accept  the  same,  will 
make  him  liable  for  the  costs,  though  he  is  entitled  to  a  decree.* 

1  The  Columbian  Building  Asso-  5  Cotterell  v.  Stratton,  28  L.  T. 

ciation  of  East  Baltimore  No.  4,  v.  Rep..  N.  S.  218;  L.  R.,  8  Cli.  App. 

Crumb,  42  Md.  192.  295;  21  W.  R.  234;  42  L.  J.(  Ch. 

'  lb.                              » Ib.  417;  37  J.  P.  4. 

4  The  German  Fair  Hill  Building  •  Columbian  Building  Associa- 

.W.K-iaJinn  c.  Metzger,  3  W.  N.  C.  tion  of  East  Baltimore  No.  4,  v. 

(Pa.)  204.  Crumb.  42  Md.  192. 


210  THE   LAW   OF  BUILDING   ASSOCIATIONS.       [CH.  VII. 

Repayment  or  Redemption  in  Permanent  Societies.   Liability  of  Mem- 
bers. 

§  180.  Nothing  has,  in  the  foregoing  sections,  been  said 
as  to  the  question  of  repayment  or  redemption  in  permanent  ' 
societies.  Nor  is  it  necessary  to  make  any  di>tinrtiun.-.  in 
this  particular,  between  terminating  and  the  serial  cla>>  nf 
permanent  societies;  for,  in  such,  the  rules  al>ove  laid  down 
apply,  with  this  only  difference,  that  the  rights  and  liabilities 
of  each  member  are  referable,  in  the  first  instance,  to  the  series 
to  which  he  belongs.*  In  societies,  however,  which  are  or- 
ganized upon  the  purely  permanent  plan,  the  whole  matter 
becomes  a  very  simple  one.*  For,  though  the  rules  of  each 
society  must  be  considered,  to  settle  the  terms  upon  which  an 
advanced  member  may  redeem,  equally  whether  the  society 
is  permanent  or  terminating,4  yet  the  repayments,  being  for 
a  fixed  number  of  years,  it  is  always  easy  to  calculate  the 
amount  which  ought  to  be  paid  as  the  price  of  redemption. 
If  the  rules  do  not  provide  otherwise,  it  seems  that  an  ad- 
vanced member  must  pay  the  full  amount  of  his  future  sub- 
scriptions, and  not  merely  their  present  value,  if  he  wishes  to 
redeem;6  and- if  any  fines  are  due  at  the  time  of  notice  of 
withdrawal,  they  must  be  paid  before  he  will  be  entitled  to 
have  his  security  discharged.'  And  it  must  not  be  supposed 
that  an  advanced  member  of  a  permanent  society  incurs  no 
liability  other  than  that  expressed  in  the  deed  ;  for  where,  by 
the  rules  of  such  a  society,  it  was  provided  that  advanced 
members,  on  paying  their  subscriptions  for  fourteen  years 

1  See  ante,  §  46.  others,  and  the  accounts  of  each 
9  Where  the  stock  is  issued  in  series  must  be  kept  separately.    Na- 
series,  under  the  law  and  the  build-  tional  Building  Association  v.  Hot- 
ing  association's  charter,  which  pro-  tenstein,  10  Pittsb.  Leg.  Jour.,  ^. 
vided  that  "the  gains,  losses,  and  S.   (Pa.)  225. 

the  expenses  of  the  association  shall  3  Compare  Davis  on  the  Law  of 

be  divided  among  the  several  series  Building,  etc.,  Societies,   pp.  252- 

of  stock,  and  an  account  shall  be  254. 

kept  with  each  company  or  series  of  4  Matterson  t.  Elderfleld,  20  L. 

stock,  and  all  profits,  losses,  and  ex-  T.  Rep.,  N.  S  503:  S.  C.,  L.  R.,  4 

penses    shall    be    divided    equally  Ch.  App.  207;  17  W.  R.  422;  33  J. 

among  the  several  companies,  and  P.  326. 

the  net  gains  to  be  credited  to  the  5  Matterson  t.  Elderfield,  ubi  sup. 

number   of   shares    held    by  each  6  Parker  v.  Butcher,  36  L.  J.,  Ch. 

company  at  the  time," — each  series  552;  S.  C.,  L.  R.,  3  Eq.  762. 
is  financially   independent   of    the 


§  181.]       GOVERNMENT  OF  BUILDING   ASSOCIATIONS.  211 

(discount  at  five  per  cent,  per  annum  being  allowed),  and 
also  all  fines  and  other  charges  due  up  to  the  date  of  redemp- 
tion, should  hold  their  property  released  from  the  mortgage 
to  the  society ;  and,  by  another  rule,  that  the  holders  of  ad- 
vanced shares,  on  which  subscriptions  should  have  been  paid 
for  fourteen  years,  or,  where  the  amounts  paid  should  equal 
the  advances,  should  receive  a  complete  release,  and  at  once 
cease  to  be  members :  it  was  held,  that,  on  the  society  being 
wound  up  by  the  court,  the  advanced  members  ought  to  be 
placed  on  the  list  of  contributories  of  the  society,  for  the 
purpose  of  discharging  the  debts  due  to  third  parties.1 


CHAPTER  VIII. 

GOVERNMENT  OF   BUILDING   ASSOCIATIONS. 

§  181.  Supreme  power  vested  in  corporate  meeting. 

§  182.  Of  the  corporate  meetings.     General  meetings. 

§  184.  Special  meetings.     Officers'  duty  in  calling.     Notice 

§  185.  Acts  of  special,  adjourned,  or  irregular  meetings. 

§  186.  Quorum — proxies. 

§  188.  Principal  function  of  corporate  meeting.     Election  of  officers. 

§  191.  Rights  of  inspectors  and  judges  as  to  candidacy  and  holding  of 

elections. 

§  192.  Courts  will  not  look  into  regularity  of  election  collaterally. 
§  193.  Management  of  society  entirely  in  hands  of  its  officers. 

Supreme  Power  Vested  in  Corporate  Meeting. 

§  181.  The  supreme  governing  power  of  the  association, 
subject  to  its  charter  and  the  laws  of  the  State,  is  vested  in 
the  general  body  of  the  members  in  meeting  regularly  as- 
sembled. The  principle  that  the  whole  is  bound  by  the  acts 
of  the  majority,  when  those  acts  are  lawful,  is  universally 
applicable  to  all  corporations,11  building  associations  not  ex- 
cepted.8  And  every  individual  who  becomes  a  member  is 
held  to  assent,  beforehand,  to  all  lawful  measures  that  shall 

1  In  re  The  Doncaster  Permanent  *  Angell  and  Ames,  Corp.,  §  499. 

Building  Society,  Ex  parte  Burgess,  8  Hagerman   et  al.   v.   The  Ohio 

L.  R.,  3Eq.  158;  S.  C..15L.T.  Hep.,  Building  and  Savings  Association, 

N.  8.  270;  15  W.  R.  102;  31 J.  P.  310.  25  Ohio  St.  186. 


212  THE   LAW   OF  BUILDING   ASSOCIATIONS.     [CH.  VIII. 

be  sanctioned  by  the  majority  of  the  corporation,  lawfully 
expressed.1 

Of  Corporate  Meetings.     General  Meetings. 

§  182.  The  corporate  meetings  of  the  association  are  either 
general  or  special :  i.e.,  they  are  either  the  meetings  fixed  by 
the  constitution  or  by-laws  to  occur  at  stated  times,  for  the 
election  of  officers  and  the  transaction  of  all  business  within 
the  corporate  powers ;  or  such  as  are  called  on  particular  oc- 
casions and  for  special  purposes.9 

§  183.  In  the  case  of  the  former,  provided  for  by  the  laws- 
*  of  the  association,  all  members  are  bound  to  take  notice  of 
berth  time  and  place  of  holding  them,  where  both  are  speci- 
fied by  the  by-laws,  as  well  as  of  the  usual  character  of  the 
business  to  be  transacted  at  such  meetings ;  but  where  mat- 
ters jot  usually  brought  up  at  such  meetings  are  to  be 
considered,  and  where  their  objects  are  to  be  defined  by 
express  .provision  of  the  by-laws,  special  notice  of  the  sub- 
jects intended  to  be  submitted  should  be  given.1  So, 
also,  where  no  place  is  fixed  by  the  constitution  and  by-laws- 
for  the  holding  of  the  corporate  meetings.4  At  no  time, 
however,  cnn  the  place  of  meeting  or  business  be  removed 
out  of  the  county  in  which  the  association  is  located.  Cole- 
ridge, J.,  in  an  English  case,5  says :  "  Nothing  is  more  clear 
than  that  these  societies  were  intended  to  be  local ;  and  witli 
regard  to  the  place  of  meeting,  there  is  good  reason  why 
they  should  be  locally  confined.  The  general  meetings- 
should  be  held  in  the  county  where  the  members  reside." 

Special  Meetings.     Officers1  Duty  in  Calling.     Notice. 

§  184.  In  the  case  of  special  meetings,  it  may  be  premised, 
that  the  duties  of  the  officers  pointed  out  as  the  proper  ones 

:  Angell  and  Ames,  Corp.,  §  499;  ture.     Hagerman  etal.  v.  The  Ohio- 
Field,  Corp.,  §  226.     But  this  does  Building  and  Savings  Association, 
not  extend  to  implying  the  consent  25  Ohio  St.  186. 
to  acts  ultra  vires;  if  such  be  de-  *  Field,  Corp.,  §  231. 
cided  upon,  any  single  member  may  3  Angell  and  Ames,  Corp.,  §  489; 
obtain  relief  inequity.     Davis,  Law  Field,  Corp.,  §§  227,  231. 
of  Building,  etc.,  Societies,  p.  82.  4  Angell  and  Ames,  Corp.,  §  496. . 
And  see  ante,  §  113,  p.  158,  note  6.  *  Reg.  v.  Registrar  of  Friendly  So- 
Nor  where  the  matter  passed  by  the  cieties,  16  J.  P.  613;  19  L.  T.  Rep. 
majority  is  clearly  unreasonable,  and  182.    ' '  General  "  is  used  in  the  sense 
not  within  the  intent  of  the  Legisla-  of  "corporate." 


§  185.]       GOVERNMENT  OF  BUILDING   ASSOCIATIONS.  213 

to  sign  the  call,  are,  where  the  by-laws  impose  the  duty  of 
doing  so,  at  the  request  of  a  certain  number  of  members, 
merely  ministerial,  and  they  have  no  discretion  whatever  as  to 
complying  with  the  requisition,  if  presented  in  the  form  and 
manner  indicated  by  the  by-laws.1  Notice  of  such  meetings 
and  of  their  purpose  to  all  members,  according  to  the  by- 
laws, is  essential,  and  failure  to  give  it  will  invalidate  the 
meeting.2  In  the  absence  of  any  particular  provision  to  the 
contrary,  this  notice  must  be  personal,  and  a  reasonable  time, 
or  the  usual  time,  if  a  custom  prevails,  must  be  given.8  The 
summons  must,  also,  be  issued  by  the  authority  competent  to 
assemble  the  corporation.4  But  any  defects  as  to  notice,  be- 
ing, in  general,  a  matter  affecting  only  individual  rights  of 
members,  may  be  waived  by  the  unanimous  consent  of  all  per- 
sons entitled  to  vote.6  And  if  all  having  the  right  to  vote  are 
assembled,  some  upon  notice,  and  some  without,  and  agree  to 
enter  upon  the  proceedings,  it  is  a  waiver  of  notice  and  of  the 
right  to  impeach  the  acts  of  the  meeting  upon  that  ground.8 
A  subsequent  recognition  of  their  validity  operates  in  the 
same  way.7  Nor  can  that  validity  be  questioned  collaterally 
upon  the  ground  of  want  of  notice  to  all  members.8 

Acts  of  Special,  Adjourned,  or  Irregular  Meetings. 

§  185.  A  special  meeting  can  transact  no  business  other 
than  that  for  which  it  was  summoned.'  But,  being  regularly 
convened,  it  may  be  adjourned,  and  any  business  that  might 
have  been  lawfully  transacted  at  the  original  meeting,  may 
also  be  done  at  the  adjourned  meeting.10  The  acts  of  a  meet- 
ing of  the  corporation  irregularly  convened  are  not  binding. 

1  Reg.  v.  Aldham  and  United  Par-  extraordinary  matter,  when  it  can- 

ishes  Insurance  Society,  21  L.  J.,  not  be  waived.     Ib. 
Q.  B.  1;  8.  C.,  16  J.  P.  149;  15  Jur.         «  Angell    and   Ames,   Corp.,    §§ 

1035;  18  L.  T.  Rep.  74:  R.  e.  Ban-  491-492;  Field,  Corp.,  §  227. 
natyne,  2  L.,  M.  &  P.  213;  20  L.  J.,         '  Field.  Corp.,  §  229. 
Q.  B.  210,  being  overruled.     And         8  Ib.      Advanced  members,  even 

see  Davis,  Law  of  Building,   etc. ,  when  having  pledged  their  stock  to 

Societies,  p.  86.  the  society,  are  entitled.     See  ante, 

8  Field,  Corp.,  §  227.  §  114. 

1  Field.  Corp.,  §  228.  9  Davis,  Law  of  Building,   etc., 

4  Angfll  and  Ames,  Corp.,  §  491.  Societies,  p.  88. 

8  Except  where    the  charter  iin-         I0  Field,  Corp.,  §  230;  Davis,  Law 

peratively  requires  special  notice  of  of  Building,  etc.,  Societies,  p.  88. 


214  THE   LAW   OF   BUILDING  ASSOCIATIONS.      [CH.  VHI» 

Quorum.    Proxies. 

§  186.  In  the  absence  of  special  provision  in  the  charter 
or  by-laws,  fixing  the  minimum  number  of  stockholders 
capable  of  holding  a  valid  meeting,  the  corporate  acts  of  the 
society,  binding  upon  all  its  members,  are  the  acts  of  a 
majority  of  those  present  at  a  regular  meeting,  whether  they 
were  or  were  not  a  majority  of  the  members  of  the  society.1 
Indeed,  the  majority  whose  acts  become  those  of  the  associa- 
tion, need  not  even  be  the  majority  of  all  present  at  the 
meeting,  but  of  all  present  and  voting.  "  Otherwise,  persons 
jnot  voting  would  be  counted  as  voting  against  the  measure. 
As  a  majority  of  all  present  binds  all  members,  because  all 
members  might  be  present,  and  perhaps  because  it  is  their 
duty  to  be  present ;  so  a  majority  of  those  present  and  vot- 
ing should  have  the  same  force,  because  it  is  within  the  right 
and  power,  and  perhaps  the  duty,  of  all  present  to  vote,  and 
so  to  express  their  dissent  from  any  measure  they  do  not 
approve."  * 

§  187.  It  is  otherwise,  however,  where  the  charter  requires 
the  presence  of  a  quorum  of  the  membership  in  order  to  con- 
stitute a  valid  meeting,  or  the  consent  of  a  majority  of  a 
quorum  to  pass  a  measure.  If  the  number  of  members 
necessary  to  constitute  a  quorum  is  not  prescribed  by  statute 
or  constitution,  it  comprises  a  majority  of  all  the  members 
entitled  to  vote.3  And  the  right  of  representation  by  proxy 
is  not  a  general  one,  but  must  be  shown  to  rest  upon  special 
authority  contained  in  the  constitution  or  by-laws.4 

Principal  Function  of  Corporate  Meeting.     Election  of  Officers. 

§  188.  As  the  management  of  corporations,  and  particu- 
larly of  building  associations,  is  left  almost  entirely  to  the 
directors,  the  principal  function  of  the  corporate  meetings, 
besides  that  of  occasionally  passing  by-laws,6  is  to  express, 

1  Attorney-General    v.    Davy,    2  narily  entitled  to  one  vote,  no  mat- 

Atk.  212.  ter  what  the  number  of  shares  he 

*  1  Pars.  Contr.,  p.  142.  holds.     See  ante,  §  114. 

3  Davis,  Law  of  Building,  etc.,  B  Even  this  is,  in  building  asso- 
Societies,  88:  Field,  Corp.,  §  239.  ciations,  usually  delegated  to  the  di- 

4  Angell  and   Ames,    Corp.,   §§  rectors.     As  to  by-laws  generally, 
128,  130;  Davis,  Law,  etc.,  ubi  su-  see  post,  Ch.  xv. 

pra.     And  everv  member  is  ordi- 


§  190.]        GOVERNMENT   OF   BUILDING   ASSOCIATIONS.  215 

annually,  through  the  members  at  large,  the  association's  will, 
as  to  the  policy  and  management  of  the  corporate  affairs,  by 
the  election  of  such  officers  as  will  execute  such  will.1  Tho 
election  of  officers  must  take  place  in  the  manner  and  upon 
the  nomination  required  by  the  constitution  and  by-laws.  If  no 
particular  form  is  prescribed,  no  election  conducted  ingood  faith 
will  be  set  aside.8  But  no  usage,  adduced  in  explanation,  can 
sustain  a  corporate  act,  done  in  a  manner  plainly  contrary  to 
that  prescribed  by  the  charter  (or  the  statute  to  which  it 
must  conform)  ;  *  though,  if  the  meaning  of  the  words  of  the 
charter  be  doubtful,  usage  for  a  great  length  of  time  may  be 
admitted  as  explanatory.4  The  fact  that  improper  votes  were 
received  at  an  election  will  not  necessarily  vitiate  it ;  it  must 
be  affirmatively  shown,  that,  had  they  not  been  received,  the 
result  would  have  been  different.5  In  this  case,  the  court 
may  set  aside  the  election.  On  the  other  hand,  when  votes 
which  were  rejected  by  the  inspectors,  would,  if  received, 
have  been  sufficient  to  elect  a  certain  ticket,  and  are  adjudged 
to  have  been  erroneously  rejected,  the  court  cannot  declare 
the  ticket  elected  for  which  they  would  have  been  cast,  had 
they  been  received ;  it  can  merely  vacate  the  election  alto- 
gether." And  a  failure  to  elect  new  officers  will  not  work  a 
dissolution  of  the  society  ;7  for  the  stockholders  compose  the 
corporation^  and  on  a  failure  to  elect  new  officers  at  the  time 
designated,  the  old  hold  over.8 

§  189.  If  the  election  has  been  fairly  held,  whoever  has  a 
majority  of  the  votes  cast  (no  minimum  being  required  by 
the  constitution)  is  elected,  although  a  majority  of  the  entire 
assembly  abstained  from  voting.'  Where,  therefore,  the  ma- 
jority merely  protests  against  the  election  of  an  officer,  but  st-r> 
up  no  other,  the  minority  may  elect  the  candidate  proposed.1 

§  190.  An  election  of  a  less  number  of  directors  than  tin- 
charter  calls  for  is  valid  ;  that  of  all  beyond  it,  void."  For  this 

1  Field,  Corp.,  §  186.  •  ib.,  §  136.             •  Ib.,  §  188. 

8  Angell  and  Ames,  Corp.,  §  138.  '  Hoboken    Building  Association 

*  As  to  the  effect  of  usages  of  cor-  v.  Martin,  2  Beas.  (N.  J.)  428. 

poratious  upon   acts   in   excess  of  8  Angell  and   Ames,    Corp.,    §§ 

charter,   see   Clarke's    Browne    on  142-144,  771. 

Usages  aad  Customs,  §  122.  »  Angell  and  Ames,  Corp.,  £  127. 

4  Angell  and  Ames,  Corp.,  ubi  I0  Ib.,  §  126. 

supra.  "  Ib.,  §  135. 


216  THE   LAW   OF   BUILDING   ASSOCIATION'S.      [ciI.  VIII. 

reason,  too,  ballots  containing  the  names  of  a  less  number  of 
directors  than  provided  for  by  the  charter  are  good,  as  far  ;i- 
they  go,  whilst  those  containing  a  greater  number,  must,  of 
necessity,  be  rejected. 

Hights  of  Inspectors   and  Judges   as   to   Candidacy   and  Holding   of 
Election. 

§  191.  Inspectors1  and  judges*  of  the  election  may,  at 
the  same  time,  be  candidates.3  And  the  inspectors  are  not 
bound  to  close  the  polls  at  the  end  of  an  hour,  even  where, 
by  resolution  of  the  board  from  which  they  derive  their 
power,  the  election  is  limited  to  that  time.  They  are  entitled 
to  exercise  a  reasonable  discretion  in  the  matter.  If  no  time 
be  limited,  the  poll  may  be  adjourned  from  day  to  day.4 

Courts  will  not  Look  into  Regularity  of  Election  Collaterally. 

§  192.  So  long  as  an  officer  is  such  de facto,  though  indis- 
putably ineligible,6  his  acts  have  binding  efficacy  upon  the  cor- 
poration, at  least  so  far  as  they  respect  third  parties.8  And 
persons  acting  publicly  as  officers  are  to  be  presumed  right- 
fully in  office.7  Their  acts,  as  such,  cannot  be  collaterally 
impeached,8  nor  will  the  court,  in  an  action  by  a  corporation 
against  its  debtor,  look  into  the  regularity  or  validity  of  the 
election  of  its  corporate  officers.* 

Management  of  Society  Entirely  in  Hands  of  its  Officers. 

§  193.  The  management  of  the  aifairs  of  a  building  asso- 
ciation is  entirely  in  the  hands  of  its  officers,  who,  deriving 
their  powers,  of  course,  primarily  from  the  corporate  meet- 
ing, and  possibly  appealing  to  it  in  difficult  and  momentous 
cases,  yet  virtually  constitute  the  government  of  the  associa- 
tion. 

1  Ex  parte  Wilcox,  7  Cow.  (N.  Y.)  of  trespass  relating  to  any  cor- 

402.  porate  property  against  others 

*  Commonwealth  v.  Woelper,  3  claiming  to  be  the  board  of  di- 

Serg.  and  R.  (Pa.)  29.  rectors. 

3  See  Angell  and  Ames,  Corp.,  §  7  See  Angell  and  Ames,  Corp., 
141.  §  139. 

4  See  Ib.,  §  138.  8  See  Field,  Corp.,  §  180;  2 Dill., 
*.See  Ib.,  §  287.                                  Mun.  Corp.,  §  892,  n. 

•See  Ib.  §  139;  Field,  Corp.,  §         •  Hoboken  Building  Association 
180.     And  they  may  have  au  action     v.  Martin,  2  Beas.  (N.  J.)  428. 


104. J  FUNCTIONS,    ETC.,    OF  OFFICERS.  217 


CHAPTER  IX. 

FUNCTIONS,    DUTIES,    AND    LIABILITIES    OF    OFFICEB8. 

§  194.  Usual  officers  in  building  associations,  and  their  general  powers. 

§  195.  President. 

§  196.  Treasurer. 

£  197.  Secretary. 

^  198.  Directors. 

§  200.  Limits  of  the  powers  of  directors. 

§  201.  Meetings  of  directors.     Notice.     Quorum. 

§  204.  Discretion  of  directors  cannot  be  controlled  nor  delegated. 
Committees. 

§  205.  Minutes  of  directors'  transactions. 

§  207.  Director  may  become  party  to  contract  with  society. 

§  208.  Modified  sense  in  which  directors  are  officers  in  the  society. 

§  209.  Personal  liability  of  directors  for  losses,  etc. 

§  211.  Directors  who  were  parties  to  fraud  upon  society,  whereby  it 
was  ruined,  cannot  share  in  its  assets.  Presumptive  fraud. 

§  212.  Liability  of  directors  to  account  to  society  for  waste  or  misap- 
plication of  funds. 

§  213.  Eight  of  individual  stockholders  to  sue  delinquent  directors  for 
protection  of  society.  Qualifications. 

§  214.  Trustees. 

§  215.  Officers'  bonds.     When  prerequisite  to  entering  upon  office. 

§  216.  Discretion  and  responsibility  in,  and  method  of,  approving  bonds. 

£  217.  Sureties  not  discharged  by  negligence  of  society. 

§  218.  If  officers'  election  void,  surety  not  bound. 

§  219.  Liability  of  sureties  strictly  confined  to  terms  of  bond. 

§  220.  Liability  of  officers  to  fines  and  amotion. 

§  221.  Criminal  liability  of  officers  in  certain  cases. 

§  223.  Compensation  of  officers. 

§  226.  Implied  liability  of  society  for  compenstion. 

§  227.  A  director  cannot  claim  extra  compensation  for  acts  done  in  the 
line  of  his  duty.  Services  before  organization. 

§  228.  De  facia  officer  cannot  claim  salary. 

§  229.  Salaried  officer,  improperly  removed,  may  sue  for  salary. 

§  230.  Officers  must  look  to  society's  funds  for  compensation. 

Usual  Officers  in  Building  Associations  and  Their  General  Powers, 
§  10-i.  The  officers  of  a  building  association  are,  (1)  Presi- 
dent and  Vice-President ;    (2)  Treasurer ;  (3)  Secretary ;  (4-) 
Board  of  Directors  ;  (5)  Trustees, — the  latter  class,  not  prop- 
erly officers,1  having  now  become,  almost  every  where,  un- 

1  See  post,  §  214. 


218  THE   LAW   OF  BUILDING   ASSOCIATIONS.         [CH.  IX. 

necessary  and  discarded.  The  authority  of  these  several 
officers,  in  the  absence  of  any  express  provision  and  limita- 
tions, extends  to  the  performance  of  all  the  duties  usually 
belonging  or  appertaining  to  similar  officers  in  corporations 
generally. 

President. 

§  195.  The  President,  or,  in  his  absence,  the  Vice-Presi- 
dent, is  the  presiding  officer  at  the  meetings  of  the  corporation 
or  Board  of  Directors.  In  general,  and  unless  other  officers 
are  designated,  either  by  law  or  special  direction  of  the 
society  or  its  directors,  it  is  his  business  to  call  special  meet- 
ings of  the  association ;  to  sign  contracts,  and  execute  deeds ; 
to  legalize,  by  his  signature,  warrants  drawn  upon  the  treas- 
urer, and  have  the  general  custodianship  of  the  corporate 
seal.  His  contracts  with  third  persons  for  necessaries  to  be 
furnished  the  society,  are,  in  general,  binding  upon  it,  except 
where  there  is  a  resolution  upon  the  corporate  books,  forbid- 
ding him  to  enter  into  such  a  contract.1 

Treasurer. 

§  196.  The  Treasurer  is  the  keeper  of  the  society's  funds, 
and  the  officer  entrusted  with  their  immediate  disbursement ; 
but  only  upon  warrants  and  authority  executed  and  presented 
in  the  form  and  manner  provided  by  the  by-laws.  And  he 
is  bound  to  keep  accurate  and  correct  accounts  of  the  same. 
His  functions  are  purely  ministerial.  If,  therefore,  a  war- 
rant duly  made  out  is  presented  to  him  for  payment,  for  the 
purpose,  as  he  knows,  of  applying  the  money  to  an  object  not 
within  the  powers  of  the  association,  and  he  cashes  it,  he  is 
not,  by  reason  of  such  action,  to  be  held  personally  liable  for 
the  amount.*  On  the  other  hand,  if  he  makes  a  payment  out 
of  his  pocket,  for  a  purpose  authorized  by  the  directors,  but 
not  within  the  corporate  powers,  it  seems  he  cannot  recover 
it  against  the  corporation  if  a  warrant  is  afterwards  refused.* 

1  Westerveldt  ».  Radde,  55  How.  to  "trustees,"  who,  under  the  law 

Pr.  (N.  Y.)  369.  then  in  force  in  England,  supplied, 

1  See  Grimes  v.  Harrison,  28  L.  inter   alia,    the  exact   position    of 

J.,  Ch.  823;  33  L.  T.  Rep.  115;  5  treasurers  in  our  associations. 
Jur.,  N.  S.  528;  26  Beav.  435;  23  J.         3  See   In   re    The    Kent    Benefit 

P.  421.     This  decision  really  refers  Building  Society.  30  L.  J.,  Ch.  785; 


§  197.]  FUNCTIONS,    ETC.,    OF   OFFICEBS.  219 

He  is  not  liable  for  loss  of  the  society's  funds  by  robbery,1  or 
by  failure  of  the  bank  in  which  he  has  deposited  them,  under 
authority  and  direction  of  the  Board  of  Directors,  or  in  the 
exercise  of  his  proper  judgment  and  discretion,  in  the  name 
of  the  association,  free  from  fraud  and  gross  negligence.*  To 
ensure  his  responsibility,  he  is  required  to  give  bond  for  the 
faithful  discharge  of  his  duties,  and  the  proper  application  of 
the  moneys  committed  to  his  care. 

Secretary. 

§  197.  The  Secretary's  business,  in  a  building  association, 
is,  generally,  to  conduct  the  correspondence  of  the  society  ;. 
attest  the  President's  signature  where  required ;  keep  the 
financial  accounts  of  the  association  and  correct  minutes  of 
its  proceedings,  as  well  as  of  those  of  the  Board  of  Directors ; 
summon  meetings  of  the  directors  and  the  society,  and 
furnish,  at  all  times,  any  information  concerning  the  corpo- 
rate affairs  that  may  be  necessary.  As  he  is  the  mouthpiece, 
so,  practically,  his  functions  are  those  of  a  general  agent  of 
the  association,3  and  often  he  is,  in  point  of  fact,  the  manager 
of  its  entire  business.  When  such  is  the  case,  the  society 
will  be  bound  by  orders  given  by  him,  for  necessary  repairs, 
though  not  sanctioned  by  the  required  number  of  directors, 
nor  entered  on  their  minutes.4  But  under  no  circumstances 
can  he  bind  the  society  against  its  will,  by  his  single-handed 

4  L.  T.  Rep.,  N.  8.  610;  1  Dr.  and  note.     But  he  has  no  right  to  take 

8.  417;  7  Jur.,  K  S.  1045;  9  W.  R.  anything  but  cash  in  payment  of 

686.     Also  referring  to  "  Trustees."  dues  and  fines,  even  in  the  presence 

See  preceding  note.  and  with  the   acquiescence  of  the 

1  See  Davis,  Law  of  Building,  etc.,  executive  officers :  he  and  his  bonds- 
Societies,  pp.  96-97.  In  the  case  of  men  will  be  liable  for  any  loss  thus 
Walker  v.  British  Guarantee  Asso-  occurring.  People's  Building  and 
ciation,  21  L.  J.,  Q.  B.  257;  16  Jur.,  Loan  Association  v.  Wroth,  14  Vr. 
885.  The  treasurer  was  held  liable  (N.  J.)  70;  Mutual  Building  and 
under  an  imperative  provision  of  Loan  Association  v.  Hammell,  Ib. 
the  statute.  See,  in  support  of  text,  78. 

Giblin  v.  McMullen,  38  L.  J.,  P.  C.  *  See  Davis,  Law  of  Building,  etc., 

25;  Law  Rep.,  2  P.  C.   817;  21  L.  Societies,  p.  104;  and  see  post,  §§ 

T.  Rep.,  N.  8.  214;  17  W.  R.  445;  245-246,  251-253,  as  to  incidents  to 

Fosters.  Essex  Bank,  17  Mass.  497;  agency,  etc. 

Redfield,  Bailments,  §  632.  4  Allard  v.  Bourne,  15  C.  B.,  N. 

«  See  Davis,    Law  of    Building,  S.  (109  Engl.  C.  L.  Rep.)  468;  3  N. 

etc.,  Societies,  p.  97,  and  preceding  R.  46. 


Xi'JU  THE   LAW   OF   BUILDING    ASSOCIATIONS.         [CH.  IX. 

acts,  where  they  are  either  ultra  vires  of  the  association,  or 
clearly  such  as  require  the  consent  of  the  Board  of  Directors.' 

Directors. 

§  108.  The  Board  of  Directors  constitutes,  in  a  manner, 
the  managing  committee  of  the  association.  They  are  ap- 
pointed under  provision  of  the  charter  and  by-laws,  by  the 
members  at  a  general  meeting,  for  the  purpose  of  vesting  in 
them,  for  the  convenience  of  the  association,  the  management 
of  its  affairs.  Their  acts,  therefore,  within  the  powers  con- 
ferred upon  them  by  the  constitution,  are  the  acts  of  the  as- 
sociation, binding  it,  in  every  respect,  equally  as  if  done  by 
all  its  members,  lawfully  assembled  and  acting  for  the  corpo- 
ration ;  *  and  if  they  travel  outside  of  their  proper  authority, 
and  put  the  corporation,  for  which  they  act,  in  the  position 
of  contracting  ultra  vires,  whilst  their  engagements  cannot 
be  enforced  against  the  corporation,  if  it  resists,  it  seems  that 
the  directors  may  be  held  personally  liable  on  an  implied 
warranty  that  the  society  had  power  to  do  what  they  assumed 
to  do  in  its  name."  And  there  is  no  obligation  upon  the 
members  to  indemnify  the  suffering  transgressors.  The  rule 
is,  that,  as  between  the  directors  and  the  society,  a  transaction 
by  the  former,  which  is  ultra  vires,  must,  in  order  to  bind  the 
latter,  be  authorized  or  ratified  by  each  individual  member ; 
for  no  one  will  be  assumed  to  assent,  or  to  have  pledged 
his  assent  beforehand,  to  any  but  legal  and  competent  acts. 
Where,  therefore,  the  directors  of  a  building  association,  with- 
out authority,  bought  land,  and  mortgaged  it  to  secure  money 
borrowed  for  the  purchase,  there  being  no  power  in  the  so- 
ciety to  borrow  money ;  and  certain  members,  acting  as  trus- 
tees, covenanted  to  pay  the  mortgage  debt,  and,  under  that 
covenant,  were  subsequently  obliged  to  pay  it ;  and  it  did  not 
appear  that  every  member  acquiesced  in,  or  was  even  cog- 
nizant of  the  transaction, — the  unfortunate  trustees  were  not 
permitted  to  compel  contribution  among  the  shareholders  to 
recover  their  loss.4 

1  See  post,  §§  245-246.  4  In  re  Kent  Benefit  Building 

9  Field,  Corp.,  §  67.  Society,  1  Drew,  and  Sm.  417:  7 

s  Richardson  v  Williamson,  Law  Jur.,  N.  S.  1045;  80  L.  J..  Ch.  785; 

Rep.,  6  Q.  B.  276;  40  L.  J.,  Q.  B.  9  W.  R.  686;  4 L.  T.  Rep.  N.  S.  610; 

145.     Sec  also  Hopkins  v.  Mel.affy,  25  J.  P.  805. 

11  S.  &  R.  (Pa.)  126. 


§200.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  221 

§  199.  The  precise  powers  and  duties  of  the  directors  in 
any  particular  association  depend,  in  a  great  measure,  upon  the 
provisions  of  its  constitution  and  by-laws ;  but,  in  general, 
they  are  vested  with  the  supervision  and  management  of  the 
association's  business,  by  the  disposition  of  its  funds,  the  delib- 
eration upon  all  proposals  for  loans,  the  filling  of  vacancies  in 
offices  and  among  their  own  number  for  unexpired  terms,1 
and  the  providing  of  proper  compensation,  when  not  other- 
wise fixed,  for  the  services  of  committees  and  the  members 
of  the  board.  In  the  exercise  of  their  powers,  they  are  sub- 
ject to  the  control  of  the  corporate  meeting,  but  not  to  the 
interference  of  individual  members,  except  in  so  far,  that,  if 
the  directors  act  illegally,  proceedings  may  be  taken  against 
them  by  individual  members,  representing  the  whole,  in 
equity.11  For  an  accomplished  misapplication  of  the  society's 
funds  they  may  be  made  personally  answerable.3  And  when 
the  laws  of  the  society  give  the  Board  of  Directors  a  discre- 
tion, e.g.,  in  the  amount  of  fines  to  be  imposed,  allowance  to 
members,  approval  of  withdrawals,  etc.,  it  has  been  said  that 
a  Court  of  Chancery  will  compel  them  to  exercise  that  dis- 
cretion in  a  reasonable  manner.4 

Limits  of  the  Powers  of  Directors. 

§  200.  The  power  conferred  upon  directors  of  managing 
and  controlling  the  business  of  the  association,  in  no  case  ex- 
tends to  an  authority  to  change  its  entire  character  and  pur- 
pose. Any  attempt  of  that  .description,  being  clearly  ultra 

1  When  such  power  is  vested  in  bill  against  directors  for  a  breach  of 
the    directors,    a    court  of  equity  trust,  see  Harmer  v.  Gooding,  13 
might,  it  would  appear,  compel  its  Jur.  400;  3  De  G.  and  S.  407;  East- 
exercise,  at  the  instance  of  a  mem-  wood  v.  Lever,  9  L.  T.  Rep.,  N.  S. 
ber  of  the  association,  upon  proper  615;  4  De  G.,  J.  &  S.  114;  Craig  «. 
grounds  laid.  Gregg,   83  Pa.    St.  19;  Leffman  r. 

2  Davis,   Law  of  Building,   etc.,  Flanigan,  5  Phila.    (Pa.)  155,  419; 
Societies,  p.  100;  cit.  Reg.  v.  D'Eyn-  Davis,  Law  of  Building,  etc.,  So- 
court,  28  J.  P.  116;  9  L.  T.  Rep.,  cieties,  p.  103;  post,  g§  209-213. 

N.  S.  712;  4  Best  and  S.  (116  Engl.  <  Davis,    Law  of   Building,  etc., 

C.  L.  Rep.)  820;  12  W.  R.  408;  and  Societies,  p.  104;  cit.  Matterson  9. 

see  post,  §§  212-213.  Elderfleld,  20  L.  T.  Rep.,  N.  S.  503: 

3  Grimes  t>.   Harrison,  28  L.  J.,  Law  Rep.,    4    Ch.    App.   207;   17 
Hi.  S23:  33  L.  T.  Rep.  115;  5  Jur.,  W.   R.  422;  33  J.  P.  362.      Ante, 
N.  S.  528;  26  Beav.  435;  23  J.  P.  §  135. 

421. — And  for  proper  parties  to  a 


THE  LAW   OF   BUILDING   ASSOCIATIONS.         [cil.  IX. 

vires,1  is  cnjoinable  at  the  instance  of  any  member  of  L. 
fiociation.*  Thus,  in  England,  the  conversion  of  a  built  1  in:; 
association  into  a  land  association  *  was  held  clearly  to  be  out- 
eide  of  the  powers  of  the  board.4  Equally  so  is  that  of 
changing  the  capital  stock  of  the  corporation  beyond  the  limit 
fixed  by  the  charter.6  The  former  cannot  be  done  at  all ; 
whilst  the  latter  only  by  a  corporate  meeting,  by  virtue  of  a 
specific  authority  conferred  by  the  charter,  or  by  the  Board  of 
Directors  only  in  consequence  of  specilic  charter  authorization 
thereto.  Nor  can  the  directors,  upon  their  own  responsi- 
bility, apply  for  an  enlargement  of  the  corporate  powers ;  and 
a  grant  thereof,  upon  such  application,  is  void." 

Meetings  of  Directors.     Notice.     Quorum. 

§  201.  The  meetings  of  the  Board  of  Directors  are  fixed  in 
the  laws  of  the  association  as  to  the  number  of  their  stated  oc- 
currence. Time  and  place  are  usually  left  to  their  discretion, 
as  also  the  entire  matter  of  special  meetings.  It  is  essential  that 
all  the  directors  should  have  full  notice  of  all  meetings  of  the 
board.  Being  regularly  convened,  they  may  be  adjourned ; 
but  if  the  meeting  be  irregular,  its  acts  are  invalid,  though 
they  may  become  binding  upon  the  society  where  the  interests 
of  third  parties  would  innocently  suffer.7 

1  Field,  Corp.,  §  155.  6  Angell  and  Ames,  Corp.,  §  280. 

*  Grimes  ».  Harrison,  supra  And  it  was  held  in  New  Jersey, 

8  Ib.      "A  freehold  land  society  that  the  authority  of  the  directors 

buys  lands  with  the  funds  subscribed  did  not  extend  to  empowering,  by 

by  the  members,  and  divides  that  their  presence    and    acquiescence, 

land  among   them;    but  a  benefit  the  treasurer  to   receive    anything 

building  society  advances  to  mem-  but  cash  in  payment  of  dues  and 

bers,  out  of  the  subscriptions  made  fines,  so  as  to  relieve  his  sureties 

by  members,  sums  of  money  to  be  from  liability  for  losses  thus  sus- 

laid  out  in  the  purchase  of  lands  or  tained.     ' '  The  executive  officers  or 

buildings,  which  are  then  mortgaged  directors  .  .  .  had  no  authority  to 

to  the  society.     That  appears  to  be  set  aside  the  constitution  and  by- 

the    principal    difference    between  laws  of  the  association,  or  change 

these  two  kinds  of  societies."    Ib.  the  duties  of  the  treasurer  as  there- 

4  Ib.     But  this  wrongful  conver-  in  prescribed,  nor  can  they  by  their 

sion  having  taken  place,  it  does  not,  unauthorized  acts  relieve  the  sure- 

therefore,  cease,  of  course,  to  exist  as  ties  from  their  responsibility  to  the 

a  building  association,  and  the  mem  corporation."       People's    Building 

bers  are  still  bound  by  its  rules.    Ib.  and  Loan  Association  v.  Wroth,  14 

8  Railway  Co.    v.    Allerton,    18  Vr.  70. 

Wall.  (U.  S.)  233.  7  Field,  Corp.,  §  235;  cit.  Samuel 


§  203.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  W6 

§  202.  If  the  minimum  number  of  directors  capable  of 
constituting  a  quorum  for  business  purposes  is  fixed  by  the 
articles  or  by-laws  of  the  association,  a  less  number  cannot, 
but  a  greater  can,  act.1  If  nothing  is  fixed,  concerning  that 
point,  and  the  general  rule,  that  a  majority  constitutes  a 
quorum,  obtains  when  the  meeting  is  a  stated  one  (of  which 
all  members  are  bound  to  take  notice),  or  a  special  one,  of 
which  all  have  been  duly  notified,"  a  majority  of  the  whole 
definite  number  designed  to  constitute  the  Board  of  Directors 
constitutes  a  quorum,  the  action  of  a  majority  of  which  will 
be  binding :  so  that,  if  the  whole  number  of  directors  con- 
templated by  the  constitution  be  (e.g.]  twelve,  the  least  num- 
ber capable  of  constituting  a  valid  board  will  be  seven,  of 
which  four  may  pass  any  competent  action.8  Therefore, 
where  the  management  of  a  building  association  was  vested  in 
twelve  directors,  and  a  member,  who,  under  the  rules,  had 
become  liable  to  forfeit  his  stock,  tendered  the  arrearages 
thereon,  with  fines,  to  two  of  the  directors,  who  were  sitting 
for  the  receipt  of  payments,  and  who  accepted  the  said  mem- 
ber's tender ;  and  the  first  meeting  of  the  board  held  subse- 
quently to  such  action  declared  the  stock  forfeited,  and  or- 
dered the  member's  name  to  be  stricken  off  the  roll,  and  his 
money  returned, — it  was  held  that  the  action  of  the  two  di- 
rectors was  not  a  waiver  of  forfeiture,  and  that  the  stock  was 
properly  forfeited  by  the  subsequent  action  of  the  whole 
board.4 

§  203.  If  the  rule  is  couched  in  negative  phraseology,  that 
"  not  less  than"  a  certain  number  of  the  directors  shall  con- 
stitute a  board  for  the  transaction  of  business,  the  whole  Ixxlv 
of  the  directors,  or  any  portion  thereof,  not  less  than  the 

«.  Halladay,  1  Woolw.  (C.  C.)400;  *  When    this    pre-requisite    has 

with  Am.  Corp.  Cas.  139;  Bank  of  been  omitted,  the  power  to  art  ran 

Alabama  n.  Comegys,  12  Ala.  772.  not  be  exercised  by  less  than    the; 

1  Field,  Corp.,  §  238;  cit.  Buell  v.  whole  number  of  directors,  waiving 

Buckingham  &  Co.,  16  la.  284;  Sar-  notice,  as  in  the  case  of  corporate 

gent  v.  Webster,  13  Mete.  (Mass.)  meetings,  which  sec,  aiite,  §  184,  and 

497;  In  re  Insurance  Co.,  22  Wend.  Field,  Corp.,  g  239. 

(X.  V.)  597;  Ex  parte  Wilcox,   7  »  1  Dill.,  Mun.  Corp.,  §  278. 

Cow.  (N.  Y.)  402;  Rex  v.  Monday.  «  Card  r.  Carr,  1  C.  B.,  N.  S.  (87 

Cowper,  538;  Sawyer  ».  Methodist  Engl.  C.  L.  Rep.)  197;  26  L.  J.,  C. 

Episcopal  Church,  18  Vt.  405.  P.  113. 


224  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  IX. 

number  so  limited,  is  competent  to  act.1  A  measure,  how- 
ever, requiring,  by  rule,  the  concurrence  of  a  majority  of  all 
the  directors  appointed,  cannot  be  passed  by  a  minority  of  the 
whole  number,  a  portion  being  in  any  way  disqualified  or  re- 
fusing to  vote.*  Thus,  if  the  whole  number  of  directors  con- 
templated by  the  articles  be  twelve,  and  a  certain  class  of 
measures  require  the  consent  of  a  majority  of  the  whole  num- 
ber of  the  directors  appointed,  a  measure  of  that  description 
could  not  be  passed  by  a  vote  of  less  than  seven  concurring 
directors. 

Discretion  of  Directors  Cannot  be  Controlled  nor  Delegated.    Commit- 
tees. 

§  204.  As  the  directors,  in  the  honest  exercise  of  their 
reasonable  discretion,  are  not  only  beyond  the  control  and  di- 
rection of  the  court  at  the  instance  of  a  stockholder,  but  are 
also  protected  against  any  personal  liability,  in  consequence 
of  losses  arising  from  errors  of  judgment ;'  and  because  they 
hold  their  position  mainly  Tby  reason  of  the  confidence  placed 
in  their  capacities ;  they  cannot  be  allowed,  when  the  powers 
conferred  upon  them  involve  the  exercise  of  personal  judg- 
ment and  discretion,  to  delegate  this  authority  to  another  per- 
son, or  set  of  persons,  without  some  express  authority  to  that 
purpose  found  in  the  charter  or  by-laws  under  which  they 
act.4  The  establishment  of  committees  of  their  own  num- 
ber, however,  with  special  care  of  particular  branches  of  the 
general  business,  for  the  purpose  of  expediting  and  effectu- 
ally systematizing  the  whole  work,  does  not  seem  a  delegation 
prohibited  by  the  rule,  potestas  nonpotest  delegari." 

Minutes  of  Directors'  Transactions. 

§  205.  The  transactions  of  the  directors  should  be  entered 
in  a  minute  book  belonging  to  the  society,  and  be  properly 
attested.'  Such  a  record  is,  however,  by  no  means  essential, 
either  to  the  validity  or  proof  of  their  acts  and  contracts, 

1  Edgerly  v.  Emerson,  3  Fost.  not  bind  the  association.  Angell 

555.  and  Ames.  Corp. ,  §  277. 

8 1  Dill.,  Mun.  Corp.,  §§  278-281.  8  Burrill  v.  Nahant  Bank,  2  Mete. 

8  See  post,  §§  20&-210.  (Mass.)  163. 

4  Field,  Corp.,  §  160.  And  con-  «  Davis,  Law  of  Building,  etc., 

tracts  made  by  such  sub-agents  will  Societies,  p.  103. 


§  200.]  FUXCTlOXs,    ETC.,    OF   OFFICERS.  225 

whether  in  favor  or  against  the  association.  If,  indeed,  the 
incorporating  act,  or  the  charter,  make  it  obligatory,  for  any 
purpose,  these  requisites  must,  of  course,  be  complied  with. 
But  when  there  is  merely,  in  the  charter  or  by-laws,  the  usual 
provision  that  such  record  shall  be  kept  by  some  designated 
officer,  these  directions  are  to  be  deemed  simply  directory ; 
"  and  the  breach  or  neglect  of  them,  though  it  may  render 
the  directors  or  their  scribe  responsible  in  case  of  consequen- 
tial damages  for  violation  of  duty,  is  a  matter  wholly  between 
themselves  and  the  stockholders,  and  between  the  latter  and 
the  government  as  a  violation  of  the  charter  and  by-laws,  and 
by  no  means  affects  the  validity  of  the  unrecorded  acts." ' 
Hence,  when  the  rules  of  a  building  association  declared 
that  "  the  minutes  of  the  managers,  entered  into  the  minute- 
book,  and  signed  by  the  managers  concurring  therein,  shall  be 
sufficient  authority  for  the  execution  of  any  of  the  aforesaid 
powers,"  it  was  held  that  the  failure  of  the  managers  to  sign 
as  required  did  not  invalidate  their  execution  of  the  powers 
entrusted  to  them.2 

§  206.  As  a  matter  of  evidence,  the  record,  if  existing, 
should  be  primarily  produced.  For  of  elections,  meetings, 
declaring  of  dividends,  etc.,  and  all  relations  between  corpo- 
rators and  corporation,  they  are  the  evidence.*  If  there  be 
none,  or  if,  upon  notice,  the  corporation  fail  to  produce  it, 
other  evidence  is  admitted.4  But  the  "authority  of  the  board., 
upon  which  any  act  is  done,  ought  to  be  given  at  a  regularly 
convened  meeting;  or,  at  least  (if  the  practice  of  giving  sepa- 
rate consent  has  been  adopted),  after  consultation  of  all  to- 
gether, and  a  concurrence  of  a  majority.5  Where,  by  a  spe- 
cial act  of  an  incorporated  company,  three  directors  were  a 
quorum,  and  the  secretary  obtained  at  one  time  the  authority 
of  two  directors,  to  seal  a  bond  for  money  due  the  engineer  of 
the  company,  and  at  another  time  the  authority  of  another 

1  Angell  and  Ames,  Corp.,  §  291  a.  v.  Sendmayer,  50  Id.  fc7;  Dobinson 

*  Priestly  t>.  Hopwood,  10  L.  T.  r>.   Hawks,   16  Sim.  407;   12  L.   T. 
Hep.,  N.  8.   646;   12  W.  R.  1031;  Rep.  238;  39  Engl.  Ch.  Rep.  406. 
see,  also,  Davis,  Law  of  Building,  4  Angcll  and  Ames,  Corp.,  §291  a. 
etc.,  Societies,  p.  104.  5  See  Field,    Corp.,    §§  236  and 

*  Bank    of    Commerce's    Appeal,  237.     It  is  certainly  not  advisable  to 
7:i  1'a.  St.  59;  German  Union  Build-  run  the  risks  involved  in  tlii<  pruc- 
iiiii  and  Savings  Fund  Association  ticc. 


226  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  IX. 

director,  it  was  held  that  the  bond  was  not  the  deed  of  the 
company.1 

Director  May  Become  Party  to  Contract  with  Society. 

§  207.  Whilst  it  is  true  that  directors  are,  in  a  sense,  trus- 
tees for  the  stockholders,  and  cannot,  therefore,  without  fraud, 
secure  to  themselves  advantages  not  common  to  the  other 
members,*  this  principle  does  not  preclude  a  director  from 
being  a  party  to  a  contract  with  his  association,  and  then,  as 
to  his  contract,  standing  as  a  stranger  to  the  society.5  In- 
deed, where  the  president  and  two  directors  constitute  a  quo- 
rum, a  sale  of  the  corporation's  land  to  the  president,  by  such 
a  quorum,  was  upheld  by  the  court.4 

Modified  Sense  in  which  Directors  are  Officers  in  the  Society. 

§  208.  It  is,  perhaps,  not  perfectly  accurate,  to  class  the 
directors  among  the  officers  of  the  building  association,  the 
general  acceptation  of  that  word  carrying  with  it  the  idea  of 
executive  rather  than  deliberative  and  directory  power.  The 
distinction  is  of  no  moment  here,  when  the  object  is  simply 
to  review  the  whole  machinery  of  a  building  association's 
government ;  but  it  may  become  of  importance.  Thus,  in . 
Xew  York,  under  the  Act  of  10  Apr.,  1851,  which  vests  the 
general  functions  of  directors  in  a  body  of  so-called  trustees, 
.and  which  requires,  that  the  persons,  being  not  less  than  nine, 
desiring  to  form  a  building  association,  shall  subscribe  articles 
setting  forth,  inter  alia,  "  What  officers,  trustees  and  attorney 
there  shall  be,"  and  that  a  true  copy  of  such  articles,  signed  by 
the  officers  of  the  association,  together  with  a  statement  showing 
the  time  when  the  association  was  organized,  the  intended  place 
of  the  transaction  of  its  business,  and  the  names  of  the  offi- 

1  D'Arcy  «.  Tamar,  Kit  Hill  and  Co.,  12  Barb.  (N.  Y.)  27;  McCul- 
Callington  Railway  Co.,  Law.  Rep.,  lough  «.  Moss,  5  Denio  (X.  Y.).  567. 
2  Exch.  158;  14  L.  T.  Rep.,  N.  S.  But  see  Bank  of  MiiMIHmry  r.  Rut- 
626.  The  corporate  powers  of  a  laud,  etc.,  R.  Co  .  30  Vt.  159;  Brail- 
corporation  are  to  be  exercised  by  street  v.  Bank  of  Royulton.  42  Id. 
the  trustees  only  when  duly  assem-  128 

bled  and  acting  as  a  board.    Con-  9  Koehler  v.  [Iron  Co.,  2  Black, 

ferring  authority  to  sell  and  convey  715. 

property  is  the  exercise  of  a  oorpo-  8  Stratton  «.  Allen,  1  Green.  229. 

rate  power.    Gashwilera.  Willis,  33  4  Buell  v.  Buckingham  &  Co.,  16 

Cal.  11;  Conro  ».  Port  Henry  Iron  la.  284. 


§  209.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  227 

cers  and  trustees  at  the  time  of  making  such  statement,  veri- 
fied by  oath  or  affirmation,  shall  be  tiled  with  the  clerk  of  the 
proper  court,  and  that  thereupon  the  association  is  to  become 
a  body  corporate,  etc. ;  a  case  arose  in  which  it  appeared, 
inter  alia,  that  all  the  officers,  and  all  the  trustees  but  one, 
had  signed.  This  point  being  urged  against  the  building  as- 
sociation, under  a  plea  of  nul  tiel  corporation,  Denio,  C.  J., 
says :  "  If  the  copy  of  articles  were  required  to  be  signed  by 
the  trustees;  in  other  words,  if  the  trustees  are  embraced 
within  the  term  'officers,'  .  .  .  the  omission  of  one  of 
them  to  sign  would  be  a  defect  which  might  defeat  the  title 
of  the  association  to  be  regarded  as  a  corporation.  It  is  no 
doubt  true,  that,  to  create  a  corporate  body  under  these  gen- 
eral laws,  the  formal  requirements  of  the  statute  must  be 
substantially  followed.  But  it  seems  very  clear  to  me  that 
the  trustees  were  not  required  to  sign.  When  we  speak  of  the 
officers  of  a  corporation,  the  term  is  understood  to  define  those 
who  are  entrusted  with  the  executive  powers  of  the  corporate 
body ;  and  if  it  is  intended  to  embrace  the  board  of  direc- 
tors, trustees,  or  managers,  they  are  expressly  named.  By 
officers  we  mean  the  president,  vice-president,  cashier,  or  sec- 
retary, and  any  others  who  are  entrusted  with  a  part  of  the 
executive  authority."  And  Campbell,  J.,  adds:  "Directors 
and  trustees  may  be  said  to  hold  office  in  the  corporation  in  a 
general  sense,  and  may  control  and  direct  presidents  and  sec- 
retaries in  the  management  of  the  business  of  the  corporation. 
But,  in  the  transaction  of  such  business  with  the  public,  the 
corporation  generally  speaks  through  its  president  and  secre- 
tary. They  are  emphatically  its  officers."  Hence,  the  omis- 
sion of  one  of  the  trustees  to  sign,  although,  if  he  had  been 
required  by  the  act  so  to  do,  it  would  have  avoided  the  char- 
ter, was  not  held  to  be  a  defect.1 

Personal  Liability  of  Directors  for  Losses,  etc. 

§  209.  Directors  cannot  be  said  to  be  trustees  as  to  the 
stockholders,  except  in  a  general  sense ;  as  an  agent  or  bailee 
entrusted  with  the  care  and  management  of  another's  prop- 
erty may  be  termed  a  trustee.  They  are  in  fact  only  maiula- 

1  Second  Manhattan  Building   Association  v.   Hayes,   4  Abb.  App., 
Dec.  (N.  Y.)  183. 


228  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [cil.   IX. 

tories,  bound  to  apply  ordinary  skill  and  diligence,  but  no 
more.1  They  are,  therefore,  personally  liable  to  the  stock- 
holders for  losses,  only  where  they  were  occasioned  by  reason 
of  some  fraud  on  the  part  of  the  directors,11  or  their  conniv- 
ance at  some  fraud,  upon  the  corporation  ;  their  embezzle- 
ment, or  wilful  misconduct,  or  breach  of  trust,  for  their  own 
benefit,  and  not  for  the  benefit  of  the  stockholders ; '  their 
gross  inattention  and  negligence,  amounting  to  a  fraud  upon 
the  rights  and  interests  of  the  stockholders,  or  by  which  the 
perpetration  of  such  fraud  or  misconduct  on  the  part  of 
agents,  officers,  or  co-directors  has  been  made  possible.4  I>ut 
they  are  not  liable  for  mistakes  of  judgment,  even  thotu'li 
they  be  so  gross  as  to  appear  absurd  and  ridiculous,  provided 
they  are  honest,  and  provided  they  are  fairly  within  the 
scope  of  the  powers  and  discretion  confided  to  the  managing 
body.6 

§  210.  But  if,  by  his  attendance  at  a  board  meeting,  a 
director  might  have  averted  a  fraudulent  action,  whilst,  in 
fact,  he  neglected  to  be  present ;  or  if,  being  present,  he  failed 
to  use  his  best  judgment  in  opposing  it, — he  will  be  deemed  a 
partner  to  it,  and  affected  with  liability.  "Every  absent 
director  is  equally  responsible  in  case  of  extreme  negligence 
in  his  attendance  at  the  board,  or,  in  case,  after  the  act  comes, 
or  must  have  come,  to  his  knowledge,  had  he  used  due  dili- 
gence, he  does  not  labor  to  avert  its  injurious  consequences."  ( 
But  the  directors  of  a  saving  fund,  who  did  not  participate  in 
the  transactions  of  the  board,  who  never  took  their  seats,  and 
against  whom  there  was  no  allegation  made  of  knowledge  of 
the  frauds,  but  merely  an  allegation  of  the  fact  of  their  elec- 
tion, were  held  exonerated.7 

1  Spering's  App.,  71  Pa.  St.  11.  Watt's  App.,  supra;  see  also  Smith 

9  Crook  «.  Jewett,  12  How.  Pr.  t>.  Prattville  Manufacturing  Co.,  29 

(N  Y.)  19.  Ala.  503. 

1  Attorney  -  General  v.  "Wilson,  1  6  See  opinion  of  Martin,  J.,  in 

Craig  and  Ph.  (18  Engl.  Ch.  Rep.)  Percy  v.  Millandon,  3  La.  5G8 

1;  10  L.  J.,N.  S.  53.  (575). 

4  Spering's  App.,  ubi  supra;  '  Maisch r>.  Seamen's  Saving  Fund 

Watt's  App.,  78  Pa.  St.  870.  Society,  5  Phila.  (Pa.)  30;  Leffman 

4  Spering's  App.,  supra  (p.  24);  v.  Flanigan,  Ib.  155,  419. 


§  212.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  229 

Directors  who  were  Parties  to  a  Fraud  Upon   Society,  whereby  it 
was  Ruined,  Cannot  Share  in  its  Assets.     Presumptive  Fraud. 

§  211.  A  director  who  has  thus  become  a  party  to  a  fraud 
upon  the  building  association,  by  means  of  which  it  became 
ruined,  cannot  afterwards  assume  to  share  in  its  assets  alike 
with  the  other  members.  His  intention  may  have  been  good 
enough.  "  But  an  act  innocent  in  the  intention  may  be  so 
injurious  in  the  consequences,  that  the  law  declares  it  to  be  a 
fraud,  and  forbids  it.  ...  Out  of  the  act,  the  law  constructs 
the  fraud,  though  not  tainted  with  actual  fraud.  But  legal 
presumptions  lie  thickly  strewn  in  the  pathway  of  evidence. 
A  state  of  facts  being  proved,  the  law  makes  its  own  infer- 
ence, and  from  it  pronounces  that  another  fact  must  have 
existed.  Thus,  from  a  receipt  for  one  year's  rent  in  full,  a 
prior  year's  rent  is  presumed  to  be  paid.1  And  so,  from  the 
nature  of  the  fact  proven,  the  law  may  infer  the  existence  of 
fraud,  the  party's  knowledge  of  it,  and  participation  in  it." " 
Hence,  one  who  was  a  director  in  a  building  association,  long 
insolvent  by  declaring  dividends  out  of  the  capital,  with  his 
knowledge  and  participation,  is  not  entitled  to  receive,  from 
the  estate  of  the  corporation  in  the  hands  of  its  assignee,  for 
the  benefit  of  creditors,  any  part  of  a  loan  made  by  him  to 
the  association  to  pay  a  dividend  thus  fraudulently  declared, 
until  the  stockholders  are  fully  paid.  And  this  priority  over 
him  extends  to  all  who  were  members  of  the  association  at 
the  time  of  the  assignment  for  benefit  of  creditors,  whether 
they  had  become  so  before  or  after  the  declaring  of  the 
fraudulent  dividend.8 

Liability  of  Directors  to  Account  to  Society  for  Waste  or  Misapplica- 
tion of  Funds. 

§  212.  Subject  to  the  qualification  above  laid  down,  the 
waste  or  misapplication  of  the  funds  of  a  building  association 
by  its  directors  entitles  the  corporation  to  resort  to  equity,  in 
order  to  compel  an  account  at  their  hands  for  such  waste  or 
breach  of  trust,  even  though  an  adequate  remedy  be  conceded 
at  law.4 

1   Kisterbock's  App.,  51  Pa.  St.         »  Ib. 

485.  *  Citizens'  Loan  Association  of 

8  Ib.  Newark  v.  Lyon  et  al.,  2  Stewart 


230  THE   LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  IX. 

Right  of  Individual  Stockholders  to  Sue  Delinquent  Directors  for  Pro- 
tection of  Society.     Qualifications. 

§  213.  But  whilst  the  right  of  the  corporation  to  sue,  in 
such  case,  is  unquestioned,  it  may,  under  certain  circum- 
stances, even  become  the  right  of  any  individual  stockholder 
to  do  so,  for  the  protection  and  in  the  interests  of  the  so- 
ciety.1 Yet  a  stockholder  cannot  sue  the  directors  in  a  sep- 
arate action  at  law  for  damages,  sustained  by  reason  of  their 
negligence."  The  remedy  must  be  in  a  form  to  protect  the 
interests  of  the  corporation,  as  the  trustee  for  all  the  stock- 
holders. By  such  negligence  or  misfeasance  of  the  directors, 
no  individual  member  can  be  said  to  have  sustained  a  loss 
which  is  not  common  to  all  the  other  stockholders.8  It  gives 
him  no  special  ground  for  complaint  against  the  directors. 
Nor  would  a  judgment  obtained  against  the  directors  in  such 
an  action,  it  seems,  be  a  bar  to  an  action  by  the  corporation, 
whose  remedy  against  the  culpable  parties  cannot  be  ques- 
tioned ;  nor  would  it  affect  the  measure  of  damages  in  such 
an  action,  because  the  corporation  would  recover  primarily 
for  its  creditors.  If,  therefore,  it  were  held  competent  for 
any  individual  stockholder  to  proceed,  on  his  own  separate 
behalf,  against  such  officers,  the  anomaly  would,  it  seems, 
arise  of  making  a  person  liable  (upon  the  same  cause  shown,) 
not  only  to  an  indefinite  number  of  actions,  on  all  of  which 

(N.    J.),    110;    Angell  and   Ames,  J.  P.  421 ;  Evans  v.  Coventry,  3  W. 

Corp.,  §  312;  cit.  Attorney-General  R  149;  24  L.  T.  Rep.  186;  19  J.  P. 

V.  Utica  Insurance  Co.,  2  Johns.,  Ch.  37;  Reeve  v.  Perkins,  2  J.  and  W. 

371,  389;  Baylers  v.  Orne,  Freem.,  390;   Harmer  v.    Qooding,   13  Jur. 

Ch.  161,  173:  Attorney-General  v.  400;  3  De  G.  and  8.  407;  13  L.  T. 

Wilson,  1  Cr.  and  Ph.  2.  Rep.  134;  Trott  v.  Hughes,  16  L.  T. 

1  Watts'  App.,   78  Pa.   St.  370;  Rep.  260. 

Spering's  App.,  71  Pa.  St.  11 ;  Grave-         »  Craig  v.  Gregg  et  aL,  83  Pa.  St. 

stine's  App.,  13  Wright  (49  Pa.  St.),  19. 

310;  Robinson  v.  Smith,  3  Paige  (N.         8  But  in  Scotland  it  is  said  that 

Y.),  222;  Scott  v.  Dc-peyston,  1  Edw.,  if  a  member  suffers,  by  a  violation 

Ch.  518;  Allen  v.  Curtis,  26  Conn,  of  the  rules  by  the  officers  of  the 

456;    Maisch    v.   Seaman's    Saving  society,  its  funds  will  be  liable  to 

Fund   Society,    5  Phila.   (Pa.)  30;  him  in  damages.     See  Davis,  Law 

Leffman  v.  Flanigan,  Ib.  155,  419;  of  Building,  etc.,  Societies,  p.  222; 

Greaves  v.  Gouge,  69  N.  Y.  154.  cit.   Blue  v.    West    Kilbride  Free 

And  see  Grimes  c.  Harrison,  28  L.  Gardeners'  Society,  4  Macph.  1042; 

J.,  Ch.  823;  33  L.  T.  Rep.  115;  5  S.  C.,  38  Sc.  Jur.  53& 
Jur.,  N.  S.  528;  26  Beav.  435;  23 


§  214.]  FUNCTIONS,    ETC.,    OF  OFFICERS.  231 

judgment  might  be  obtained,  but  also  of  again  subjecting 
him  to  another  action  on  the  same  grounds,  in  which  the 
measure  of  damages  would  be  the  whole  aggregate  of  all  the 
M'panite  judgments  already  obtained.  This  clearly  cannot  be 
allowed,  and  the  member  desiring  to  step  in  for  the  protection 
of  his  association,  upon  a  proper  case,  must  bring  all  the  par- 
ties interested  into  court  at  once,  and  for  the  purpose  of  ac- 
complishing this,  must  proceed  by  bill  in  equity,  in  which 
both  the  officers  sought  to  be  charged  arid  the  corporation 
must  be  joined  as  defendants.1  And  in  New  York  it  has 
been  held  that  such  an  equitable  action  can  be  had  by  a  stock- 
holder only  after  application  to,  and  refusal,  or  neglect 
amounting  to  refusal,  by  the  corporation  to  bring  it,  and  that 
the  facts  of  the  complaint  made  to,  and  rebuff  received  from, 
the  corporation  must  be  set  forth  in  the  complaint.2  And 
the  bill  alleging  the  misconduct,  etc.,  must  ask  relief  upon 
that  ground ;  otherwise,  upon  demurrer,  the  allegation  will 
be  treated  as  immaterial.3  If,  however,  the  illegal  act,  in- 
stead of  being  already  consummated,  still  rest  merely  in  con- 
templation, it  seems  that  it  is  the  right  of  every  individual 
member  to  come  into  a  court  of  equity,  and  ask  that  the  com- 
mission of  the  act,  by  which  he  as  well  as  the  rest  of  the 
stockholders  would  be  injured,  be  restrained.4 

Trustees. 

§  214.  The  functions  of  trustees,  properly  so  called,  in  a 
building  association,  are  principally,  to  hold  title  for  the  asso- 
ciation of  its  real  estate,  and  of  the  real  estate  conveyed  to 
secure  debts  due  to  the  association,  and  to  convey  and  release 
the  same,  by  order  of  the  Board  of  Directors,  as  may  be 
required  by  the  constitution  and  by-laws.6  As  a  compara- 
tively useless  piece  of  machinery,  this  class  of  officers  has,  in 

1   See    Leffman    v.    Flanigan,    5  *  Thompson  v.  Planet  Benefit  B. 

Puila.  155,  419;  Craig  v.  Gregg,  83  S.,  15  L.  R.,  Eq.  333;  42  L.  J.(  Ch. 

Pa.  St.  19;  Greaves  v.  Gouge,  69  N.  364;  21  W.  R.  474;  28  L.  T.,   N.  S. 

Y.  154.    But  see  Gravestine's  App.,  549. 

49  Pa.  St.  310.  «  See  ante,  §§  113-114. 

»  Greaves  v.  Gouge,  69  N.  Y.  154.  •  See    Act,    May    29,   1852.    g   3 

This  does  not  apply  to  a  bill  brought  (Virginia);  Davis,  Law  of  Building, 

in  good  faith  by  a  creditor.    Lothrop  etc.,  Societies,  pp.  93-99. 
v.  Stedmau,  42  Conn.  083. 


THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  IX. 


general,  gone  out  of  date.  In  England  (where,  since  the  pas- 
sage of  37  and  38  Vic.,  c.  42,  the  office  has  become  alm«»r  u 
sinecure1)  they  were  (previously  to  that  statute)3  said  to  act 
ministerially  only.'  Where  the  property  of  the  association 
is  vested  in  trustees,  if  any  of  them  die,  resign,  or  be  removed, 
and  the  vacancy  tilled  by  new  appointment,  the  same  est;itu 
and  interest  as  the  former  trustees  had  therein,  and  subject  to 
the  same  trusts,  vests  in  the  new  trustees,  without  any  assign- 
ment. Thus,  a  mortgagor,  being  one  of  three  trustees  of  the 
society,  executed  his  mortgage  to  the  other  two,  one  of  whom 
subsequently  resigned,  and  a  successor  was  appointed.  The 
interest  of  the  original  mortgagees  vested,  without  assign- 
ment, in  the  remaining  trustee  and  successor,  exclusively,  of 
the  mortgagor.4 


1  37  and  38  Viet.,  C.  42,  S.  25; 
Davis,  Law  of  Building,  etc.,  So- 
cieties, p.  99. 

1  Under  Statute  10  Geo.  4,  C.  56, 
they  acted  as  treasurers.  See  ante, 
§  196,  and  notes. 

8  Grimes  r.  Harrison,  28  L.  J., 
Cli.  8'?  5:  :!:}  L.  T.  Rep.  115;  5  Jur., 
N.  >  .'<)  Beav.  435.  And  see 

aulc.  s  uj. 

*  Walker  v.  Giles,  6  C.  B.  (60 
Eugl.  C.  L.  Rep.)  662;  13  Jur.  588; 
18  L.  J.,  C.  P.  323;  Davis,  Law 
of  Building,  etc.,  Societies,  p.  94. 
Solicitor,  —  surveyor.  In  English 
building  associations  one  of  the 
most  important  offices  is  that 
of  solicitor;  an  office  which  might, 
with  very  beneficial  results,  be  es 
tablished  in  American  societies. 
His  duty  is  to  examine  carefully  the 
title  of  every  security  which  may  be 
offered  to  the  society,  and  report 
thereon  to  the  directors;  to  prepare 
all  securities  to  the  society:  and, 
generally,  to  transact  all  its  legal 
business.  He  ought  to  be  of  good 
standing  at  the  bar,  and  thoroughly 
qualified  as  a  conveyancer.  His 
compensation  ought  to  be  a  moder- 
ate yearly  salary,  with  the  privilege 


of  charging  separate  fees  (upon  a 
scale  agreed  upon  in  advance  with 
the  society)  for  the  examination  of 
every  title,  and  for  the  preparing  of 
every  security,  to  be  charged  to  the 
applicant  for  the  loan.  (Such  a 
charge  is  not  usurious.  Hopkins  v. 
Baker's  Adm'r  et  al.,  2  P.  and  H 
(Va.)  110;  Hoboken  Building  Asso- 
ciation v.  Martin,  2  Beas.  (N.  J.) 
428,  and  see  Ex'rs  of  Howell  t.  Au- 
ten,  1  Gr.  Ch.  R.  (N.  J.)  45.)  His 
appointment  should  be  under  seal, 
even  when  his  name  is  mentioned  in 
the  rules.  Davis,  Law  of  Building, 
etc.,  Societies,  p.  107;  cit.  Arnold 
v.  The  Mayor,  etc..  of  Poole,  5  Scott, 
N.  R.  741;  2  D.,  K  S.  574:  4  M. 
and  G.  860;  12  L.  J.,  C.  P.  97;  7 
Jur.  653.  (But  see  Angell  and 
Ames,  Corp.,  §  284.)  The  law  im- 
plies a  promise,  on  the  part  of  every 
solicitor,  to  conduct  the  business  en- 
trusted to  him  with  care,  skill,  and 
despatch;  and  if  he  fails  in  this,  an 
action  on  the  case  will  lie  against 
him.  But  if  he  has  acted,  bo  mi  Jicte, 
to  the  best  of  his  ability  and  with 
reasonable  diligence,  h«i  will  not  be 
responsible.  If  he  lose  a  deed,  this 
will  be  prima  facie  negligence. 


§215.] 


FUNCTIONS,    ETC.,    OF   OFFICERS. 


233 


Officers'   Bonds :  When  Prerequisite  to   Entering  upon  Office. 

§  215.  In  order  to  enforce  the  responsibility  of  such  offi- 
cers in  the  building  association  as  have  the  handling  and 
custody  of  its  money,  or  whose  trust  in  other  particulars 
exposes  them  to  temptations,  and  the  society  to  the  possibility 
of  losses,  which  may,  under  conscientious  management,  be 
avoided ;  it  has  been  customary  to  require  such  officers  to 
give  bonds  for  the  faithful  performance  of  their  duties,  and 
the  proper  application  of  the  corporate  funds.  What  par- 
ticular officers  shall  be  liable  to  this  exaction,  is  a  matter  to 
be  determined  by  the  association  in  the  absence  of  any  stat- 
utory mandate  upon  the  subject.  But  the  completeness  of 
the  officer's  appointment  will  not  depend  upon,  nor  be  post- 
poned to,  the  giving  of  the  security,  unless  it  appears  from 
the  provision  (of  charter,  by-law,  or  statute)  to  be  so  intended, 
— us  where  it  is  declared,  that,  "  before  he  enters  upon  his 
office,  he  shall  give  security,"  etc.1 


Reeve  c.  Palmer,  27  L.  J.,  C.  P.  327; 
4  Jur.,  K  S.  929;  5  C.  B.,  N.  S.  (94 
Engl.  C.  L.  R.)  84;  S.  C.,  at 
nisi  prius,  1  F.  and  F.  48.  Nor 
has  he  the  right,  to  rely  upon  an 
extract  of  a  will  in  examining  a 
title,  instead  of  looking  at  the  whole 
will.  Wilson  v.  Tucker,  3  Stark. 
154.  In  such  case  the  question  of 
negligence  is  for  the  jury.  See  also 
Hunter  v.  Caldwell,  16  L.  J.,  Q.  B. 
274;  S.  C.  11  Jur.  770;  10  Q.  B.  69. 
If  there  has  been  negligence,  but 
the  society  derived  some  benefit 
from  the  solicitor's  services,  his  ac- 
tion upon  his  bill  will  not  be  barred, 
but  he  may  recover.  Shaw  v.  Arden, 
9  Bingh.  290  ;  23  Engl.  C.  L.  Rep. 
278,  the  jury  having  the  right  to 
strike  out  items  for  useless  work. 
Hill  v.  Featherstonhaugh,  7  Bingh. 
569;  20  Engl.,  C.L.  Rep.  244.  But  see 
Chitty  on  Contracts,  9th  ed.,522;  cit. 
Cox  9.  Leech.  1  C.B.,  N.8.  617;  S.C. 
26  L.  J.,  C.  P.  125:  3  Jur  .  N.  S.  442; 
87  Engl.  C.  L.  Rep.  617:  Long  ». 
Orsi,  18  C.  B.  610;  S.  C.  26  L.  J., 
C.  P.  127;  87  Engl.  C.  L.  Hep.  610. 


The  surveyor  is  an  officer  found 
in  some  building  associations,  whose 
duty  it  is  to  report  upon  the  sufficien- 
cy of  the  value  of  property  offered 
as  security.  His  implied  undertak- 
ings are  essentially  similar  to  those  of 
the  solicitor.  In  case  of  grossly  in- 
correct estimates,  whereby  the  so- 
ciety loses  money,  he  will  be  liable 
for  the  loss,  and  cannot  recover  for 
his  services.  Davis,  Law  of  Build- 
ing, etc.,  Societies,  p.  110;  cit. 
Moneypennya.  Hartland,  1  Car.  and 
P.  353;  2  Id.  378;  11  Eugl.  C.  L. 
Rep.  414;  12  Id.  180.  Common 
prudence  suggests,  that,  in  order  to 
prevent  the  surveyor  from  placing 
too  high  a  value  upon  property,  in 
collusion  with  the  borrower,  he- 
should  be  paid  out  of  the  irt'm-ral 
funds ;  or  that  the  rule  be  established, 
that  everv  application  for  a  loan  be 
accompanied  with  a  deposit  of  the 
surveyor's  fee  arronlinir  to  the  scale 
adopted.  D»vii,Law,etc.,vW«<pfti 

1  Angel  1  and  Aim-*.  Corp..  £  285. 
See  Howcll  v.  Commonwealth,  ex 
rel.  Keppleman,  97  Pa.  St.  332. 


234  THE  LAW  OF  BUILDING   ASSOCIATIONS.  [CH.  IX. 

Discretion  and  Responsibility  in,  and  method  of,  Approving  Bonds. 

§  216.  The  approval  of  the  security  offered  devolves,  in 
general,  upon  the  directors.  If,  then,  fraudulently  and 
negligently,  they  approve  of  notoriously  bad  security,  or  do 
not  follow  out  the  directions  of  the  rules  of  the  society  upon 
the  subject,  they  will  be  held  personally  liable  in  case  of  loss 
sustained  in  consequence.1  But,  though  the  direction  be  that 
the  bond  shall  be  given  by  the  officer  and  two  sureties,  a  bond 
given  by  the  officer  and  one  surety, a  or  merely  by  two  sure- 
ties, without  joining  the  officer,8  will  be  valid  and  binding 
upon  the  sureties,  if  accepted  by  the  directors.  Nor  is  it 
necessary  that  their  vote  of  acceptance  or  approval  be  re- 
corded, unless,  by  charter,  by-law,  or  statute,  that  be  made  a 
prerequisite.4  Indeed,  in  the  absence  of  such  express  require- 
mentj  it  need  not  be  shown  to  have  been  by  vote  at  all,  but 
may  be  presumed  from  the  fact  of  the  bond  being  found  in 
their  possession.6 

Sureties  not  Discharged  by  Negligence  of  Society. 

§  217.  Being  once  accepted,  the  sureties  on  an  officer's 
bond  will  not  be  discharged  by  neglect  on  the  part  of  the  as- 
sociation to  enforce  its  by-laws  requiring  its  officers  to  account, 
from  time  to  time,  where  there  has  been  no  fraudulent  con- 
cealment by  it  of  circumstances  and  acts  on  the  part  of  the 
officer,  which,  if  brought  to  the  surety's  notice,  would  have 
prevented  him  from  becoming  such ;  or  where  there  has  been 
no  demand  from  him  for  investigation  of  the  officer's  account, 
or  his  removal.  By-laws  of  this  description  have  the  object 
of  serving  for  the  greater  security  of  the  corporation,  not  of 
the  surety.  They  form  no  part  of  his  contract  with  the  cor- 
poration— a  contract  which  is  founded  in  the  confidence  he 
has  in  his  principle,  and  not  in  his  confidence  in  the  vigilance 
of  the  other  officers  of  the  corporation.  As  to  it,  they  are 
held  to  be  directory  only  ;  so  that  neglect  to  comply  with 
them  will  not,  in  the  absence  of  circumstances  amounting  to 

1  Angel  1  and  Ames,    Corp.,    ubi        9  Angell    and    Ames,   Corp.,    § 

supra.     But  no  policy  of  the  law  254. 
precludes  directors  from  becoming        J  Ib.,  §  319. 
an  officer's  sureties.     AmherstBank        4  Ib.,  §  284. 
v.  Root  et  al.,  2 Mete.  (Mass.)  534-5.         5  Ib.,  §  252- 


§  219.]  FUNCTIONS,    ETC.,    OF  OFFICERS.  235 

fraud,  exonerate  him  from  liability  upon  his  undertaking.1 
Even  where  the  executive  officers  were  present  and  acquiesced, 
when  the  treasurer,  instead  of  cash,  in  payment  of  dues  and 
fines,  accepted  promises  to  pay,  given  by  members  and  others 
for  them,  the  sureties  were  not  discharged  from  liability,  upon 
the  bond,  for  credits  thus  given  and  losses  arising  thereon.2 

If  Officer's  Election  Void,  Surety  not  Bound. 

§  218.  But  if  the  officer's  election  be  invalid,  it  seems  his 
sureties  will  not  be  bound.  They  undertake  for  legal  officers, 
not  for  illegal  incumbents.3 

Liability  of  Sureties  Strictly  Confined  to  Terms  of  Bond. 

§  219.  The  condition  of  an  officer's  bond  is  confined  to 
the  period  of  the  appointment  or  election,  for  which  it  was 
given.4  "  It  is  a  well-settled  rule,  both  at  law  and  in  equity, 
that  a  surety  is  not  to  be  held  beyond  the  precise  terms  of 
his  contract.  This  rule  is  founded  upon  the  most  cogent  and 
salutary  principles  of  public  policy  and  justice.  In  the  com- 
plicated transactions  of  civil  life,  the  aid  of  one  friend  to 
another,  in  the  character  of  surety  or  bail,  becomes  requisite 
at  every  step.  Without  these  constant  acts  of  mutual  kind- 
ness and  assistance,  the  course  of  business  and  commerce 

1  Angell  and  Ames,  Corp.,  §321;  exercised  by  the  society  over  their 

Brandt  on  Suretyship  and  Guaranty,  officers,  the  cautioners  will  be  liber- 

§  369;  Madden  v.  McMullen,  13  Ir.  ated  from  their  responsibility." 

C.  L.  R.  305  (4  L.  T.  Rep.,  N.  S.  J  People's  Building  and  Loan  As- 

180);  The  U.  8.  v.  Kirkpatrick,  9  sociation  v.  Wroth  etal.,  14  Vr.  (N. 

Wheat.  720;  The  U.  S.  v.  Vanzandt,,  J.)  70;  Mut.  Building  and  Loan  As- 

11  Wheat.  184;  P.,  Ft.  W.,  and  C.  sociation  v.  Hammell  et  al.,  Ib.  78. 

R.  R.  Co.  v.  Shaeffer.  59  Pa.  St.  350;  «  See  opinion  of  Thompson,    C. 

Wayne   «.   Comm.  National  Bank,  J.,  in  City  v.  Given,  60  Pa.  St.  136 

52  Pa.  St.  343;  Taylor  v.  Bank  of  (140). 

Kentucky,  2  J.  J.  Marsh.  564.     But  «  So,  too,  the  liability  of  a  surety 

see  Philips  v.  Foxall,  27  L.  T.  Rep.,  on  a  bond  of  indemnity  against  liens, 

N.  S.  231;   S.  C.  Law  Rep.,  7  Q.  accompanying  a  mortgage,   cannot 

B.  666:  41  L.  J.,  Q.  B.  293;  20  W.  be  extended  to  a  loss  accruing  on  :i 

R.    900.     The  case   of  the  Thistle  sale  of  the  mortgaged  premises,  after 

Friendly    Society  of    Aberdeen  «.  the  mortgage  has  merged.     Build 

Garden,  12  Shaw  and  D.  745,  is  re-  ing  Association  v.  Benson,  2  W.  N. 

i'lMTi-d  to  in  Davis,  Law  of  Building,  C.  (Pa.)  541.     Here,   however,  the 

etc..  Societies,  p.  125,  note  <t,  in  sup-  additional  principle  was  invoked, 

port  of  the  statement  that,  in  Scot-  that,     when    principals    negotiate, 

l.ind.  "  unless  a  sufficient  control  be  sureties  are  discharged. 


236  THE  LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  IX. 

would  be  prodigiously  impeded  and  disturbed.  It  becomes, 
then,  excessively  important  to  have  the  rule  established,  that 
a  surety  is  never  to  be  implicated  beyond  his  specific  engage- 
ment." l  An  officer  of  an  association,  elected  to  fill  a  vacancy 
in  an  office  which  was  annual,  gave  bond  with  sureties. 
.Judgment  was  entered  on  the  bond,  and  the  .officer  was  re- 
peatedly re-elected,  giving  no  new  security.  It  was  held  that 
the  bond  was  confined  to  the  period  for  which  he  was  first 
elected,  when  it  was  given,  and  that  the  society  was  not  en- 
titled to  payment  of  the  judgment  as  a  continuing  lien.' 
Upon  the  same  principle,  it  was  decided  that  a  bond  stipu- 
lating for  the  good  conduct  of  an  officer  holding  office  for  a 
fixed  time,  and  until  "  another  officer  be  appointed,"  will  not 
remain  in  force  after  the  reappointment  of  such  original  offi- 
cer.' The  term  "  another,"  in  such  case,  does  not  mean  "  an- 
other person;"4  but  if  there  is  a  re-election,  it  is,  in  fact, 
another,  and  not  the  same  office.6  It  is  a  well  settled  rule, 
therefore,  that,  where  the  office  of  treasurer  in  a  building  as- 
sociation is  annual  or  limited,  the  sureties  on  his  official  bond 
will  not  be  liable  for  a  breach  of  the  duties  of  such  officer 
beyond  the  definite  term,  when  the  condition  is  for  good  be- 
havior during  his  continuance  in  office.  If,  however,  thereto 
,  be  added,  "  whether  of  the  present  term  for  which  he  has 
been  elected,  or  of  any  succeeding  terms  to  or  for  which  he 
may  be  elected,"  the  sureties'  liability  continues.* 

Liability  of  Officers  to  Fines  and  Amotion. 

§  220.  The  faithful  discharge  of  their  duties  by  the  offi- 
cers may  also,  in  a  measure,  be  secured  by  the  imposition  of 
fines,  according  to  the  provisions  of  the  by-laws;7  and  per- 
sistent neglect,  or  infidelity,  punished  by  amotion.  This  is  a 


1  Chancellor  Kent,  in    Ludlow  v.  *  Ib. 

Simond,  2  Caines'  Cases  in  Error,  k  Amherst  Bank  v.  "Root  et  al.,  2 

1.  Mete.  (Mass.)  536;  Welch  v.  Sey- 

8  The   Manufacturers'    and     Me-  mour,  28  Conn.  387. 
ehanics'  Saving  and  Loan  Co.  v.  The  6  People's  Building  and  Loan  As- 
Odd  Fellows'  Hall   Association  of  sociation    of    Camden,    N.   J..    v. 
Spring  Garden.  48  Pa.  St.  446.  Wroth  et  al..  14  Vr.  (X.  J.)  70:  Mut. 

3  Citizens'  Loan     Association   of  Building  and  Loan  Association  v. 

the  City  of  Newark  v.  Nugent  et  al.,  Hammell,  Ib.  78. 

11  Vroom  (40  N.  J.  L.  RA  215.  '  See  ante,  §§  96-98,  10a 


§221.J  FUNCTIONS,    ETC.,    OF  OFFICERS.  237 

power  which  is  inherent  in  the  society,1  and  if  exercised  fot 
the  reasons,  and  strictly  in  the  manner,  and  with  the  formali- 
ties prescribed  by  its  rules,  the  individual  whom  it  affects, 
and  who  is  equally  subject  to  those  rules,  has  nothing  to  com- 
plain of.9  And  it  is  always  justifiable  where  the  officer  ha& 
become  guilty  of  transgressions,  either  such  as  are  in  them- 
selves infamous,  and  whilst  they  have  no  immediate  relation 
to  the  office,  yet  make  the  offender  unfit  to  execute  any  pub- 
lic franchise ; 3  or  such  as  are  against  his  duty  as  a  corporator, 
and  amount  to  a  breach  of  the  tacit  condition  annexed  to  the 
office ;  or  such  as  are  at  once  an  offence  against  the  duty  of 
his  office,  and  a  matter  indictable  at  common  law.4  But, 
although  the  appointing  power  be  vested  in  certain  officers, 
that  of  amotion,  unless  expressly  delegated  to  them,  rests 
with  the  association  at  large.6 

Criminal  Liability  of  Officers  in  Certain  Cases. 

§  221.  In  cases  of  gross  breaches  of  trust,  appropriation 
of  the  society's  funds,  conspiracy  to  defraud,  etc.,  the  wrong- 
doing officer  may  become  amenable  to  the  criminal  laws  of 
the  State,  the  same  as  the  officers  of  any  other  society  or  cor- 
poration. Many  of  the  building  association  acts  expressly 
make  applicable,  to  the  officers  of  these  institutions,  the  stat- 
utes relating  to  embezzlement,  or  fix  particular  penalties  for 
particular  misfeasances.  In  Virginia,  the  secretary  of  a  build- 
ing association  was  indicted  for  the  larceny  of  a  check,  the 
property  of  the  association,  which  had  been  given  to  him  in 
payment  of  a  debt  due  the  association.'  It  was  made  payable 
to  the  accused  as  secretary,  and  also  payable  to  bearer.  This 
check,  the  court  say,  was  the  property  of  the  association,  and 
should  have  been  turned  over  to  the  treasurer  by  the  secre- 
tary. If  he  had  accounted  for  the  money,  that  would,  of 
course,  show  that  he  had  no  intention  to  appropriate  the 

1  1  Dill.  Mun.  Corp.,  §  240;  An-  3  In  which  case  there  must  be  a 

gell  and  Ames,  Corp.,  g§  423-424.  previous    indictment    and    convic- 

*  Davis,    Law  of  Building,  etc.,  tion. 

Societies,   p.   90-91 ;  cit.   Evans  v.  *  Rex  e.  Richardson,  1  Burr.  539. 

Hearts  of  Oak  Friendly  Society,  12  *  See  1  Dill.  Mun.  Corp.,  $  -Ml. 

Jur.,  N.  S.  163;  Roberts  v.  Price,  And  see  An  gel  1  and  Ames,  Corp.,  =• 

16  L.  J.,  C.  P.  169;  11  Jur.  352;  4  703.     And  see   post,   §  229.    ns    to 

C.  B.  1231.  action  for  wrougful  removal. 


238  THE  LAW  OF   BUILDING  ASSOCIATIONS.         [CH.  IX. 

clurk.  Not  having  done  so,  it  was  a  question  for  the  jury, 
whether  he  intended  to  embezzle  it.  In  order  to  convict 
him,  it  was  necessary  that  the  jury  be  satisfied  that  this  in- 
tention existed  before,  or  at  the  time  the  check  passed  into 
the  possession  of  the  bank.  If  he  drew  the  money  on  the 
check  with  the  intention  of  using  it  for  his  own  purposes, 
and  not  for  the  liquidation  of  the  debt  it  was  given  for, 
though  probably  with  the  intention  of  returning  it,  at  some 
future  day,  to  the  building  association,  he  was  guilty  of  em- 
bezzlement of  the  check.  And  the  records  of  the  building 
association  whilst  he  was  in  office,  and  oral  evidence  relating 
to  the  organization,  objects,  and  business  of  the  society,  the 
appointment  and  duties  of  the  accused  as  secretary,  his  con- 
duct with  respect  to  the  funds  of  the  association  in  his  hands, 
and  his  disposition  and  appropriation  of  the  check,  for  the 
larceny  of  which  he  was  indicted,  were  competent  evidence 
against  him.  But  the  question,  whether  or  not  the  building 
association  was  organized  strictly  in  accordance  and  con- 
formity with  the  requirements  of  the  statute,  was  not  a  proper 
subject  of  inquiry.  Having,  as  secretary  of  the  association, 
received  and  wilfully  appropriated  its  funds,  or  property,  he 
cannot  be  heard,  upon  a  criminal  prosecution  therefor,  to  con- 
tradict its  legal  existence.1 

§  222.  There  has  fortunately  not  often  been  occasion,  in 
this  country,  to  enforce  the  criminal  responsibility  of  officers 
in  building  associations.  But  the  following  observations, 
borrowed  from  Davis,  Law  of  Building,  etc.,  Societies,  pp. 
127-133,  in  England,  may  become  of  substantial  service  to 
the  American  practitioner : 

"  In  all  proceedings,  whether  criminal  or  civil,  in  respect 
of  a  society  under  the  old  law,  the  property  of  the  society  \\  ;is 
to  be  deemed  to  be  in  the  treasurer  or  trustees  of  the  society.' 
and  accordingly,  where  a  trusteee  of  a  society  misappropri- 
ated the  funds,  it  was  held  that  the  property  might  be  laid  in 
the  treasurer,'  and  probably  the  converse  would  also  hold 

1  Shinn    «.    Commonwealth.    32  Lorse,  29  L.  J.,  M.  C.  132;  S.  C.,  8 

Grattan  (Va.),  899.  W.  R.  422;  6  Jur.,  N.  S.  513;  8  Cox, 

-  10  Gco.  4.  C.  56,  §  21.  C.  C.  302;  Bell,  C.   C.  259;  24    J. 

3  R.   r.  Cain,  Car.  and    Mar.   (41  P.  341. 
Eugl.  C.  L.  Rep.)  309.     See  R.  c. 


§  222.]  FUNCTIONS,    ETC.,    OF    OFFICERS.  239 

good.  But  it  was  necessary  to  be  able  to  prove  that  the  party 
in  whom  the  property  was  laid  did  actually  hold  the  office  of 
treasurer  or  trustee.  Thus,  in  an  indictment  for  embezzle- 
ment by  the  clerk  of  a  savings  bank,  the  property  was  laid  in 
A.  B.  and  others.  In  order  to  prove  that  A.  B.  was  a  trus- 
tee, he  was  called  as  a  witness,  and  stated  that  since  the  com- 
mission of  the  offence  he  had  been  active  as  a  trustee,  but  be- 
fore that  date  he  had  attended  only  one  meeting,  having  been 
requested  to  do  so  lest  there  should  be  a  deficiency  of  trus- 
tees ;  but  he  was  also  a  manager,  and  it  did  not  appear  that 
any  act  was  done  at  that  meeting  which  might  not  have  been 
done  by  a  manager  as  well  as  by  a  trustee.  It  was  held  thut 
this  was  insufficient  evidence  of  acting  to  support  the  infer- 
ence of  a  legal  appointment  as  trustee.1  Where  the  secre- 
tary of  a  society,  of  which  C.  D.  and  others  were  the  trus- 
tees, was  charged  with  embezzling  money  belonging  to  the 
society,  and  in  the  indictment  the  property  was  laid  as  of  '  C. 
D.  and  others,'  without  alleging  that  they  were  trustees  of 
the  society,  it  was  held  by  the  Common  Sergeant  that  the  in- 
dictment might  be  amended  by  adding  the  words  '  trustees 
of,  etc.' ' 

"  "When  a  society  is  incorporated  under  a  new  act,  the 
property  of  the  society  must  be  laid  as  belonging  to  the  so- 
ciety in  its  corporate  name,  and  not  in  the  names  of  any  of 
the  individual  members/ 

"  It  frequently  happens  that  when  an  officer  of  a  society 
has  misappropriated  the  funds,  he  is  proceeded  against  by  in- 
dictment as  a  servant  of  the  society.  For  by  2-i  and  25  Viet., 
C.  96,  S.  98,  whosoever,  being  a  clerk  or  servant,  or  bvimr 
employed  for  the  purpose,  or  in  the  capacity  of  a  clerk  or 
servant,  shall  fraudulently  embezzle  any  chattel,  money,  <>r 
valuable  security,  which  shall  be  delivered  to,  or  re(viv. 
taken  into  possession  by  him,  or  in  the  name  or  on  the  ac- 
count of  his  master  or  employer,  or  any  part  thereof,  shall  be 
deemed  to  have  feloniously  stolen  the  same  from  his  master 
or  employer,  although  such  chattel,  money,  or  security  was 

1  R.  v.  Essex.  30  L.  T.  Rep.  171 ;  *  R.   v.    Marks,    10  Cox,   C.    C. 

S.  C.,  4  Jur.,  N.  S.  15;  7  Cox,  C.  C.  367. 

884;  1  Dears.  andB.,  C.  C.  R.  369;  8  R.  «.  Patrick,  1  Leach,  258. 
21  J.  P.  789. 


240 


THE  LAW   OF   BUILDING   ASSOCIATIONS.          [CII.  IX. 


not  received  into  the  possession  of  such  master  or  employer, 
Otherwise  than  by  the  actual  possession  of  his  clerk,  servant, 
or  other  person  so  employed.1  In  order  to  come  within  the 
denomination  of  '  clerk  or  servant,'  the  person  must  be  under 
the  direction  of  a  master,  and  must  receive  remuneration  for 
his  services.  Where  two  societies  appointed  a  committee,  of 
which  the  accused  was  a  member,  to  conduct  an  excursion, 
and  the  committee  employed  the  accused  and  several  others 
to  sell  tickets,  when  it  became  his  duty  to  pay  over  the  money 
so  received  (which  was  to  belong  to  the  two  societies)  to  a 
person  appointed  by  the  committee,  but  he  received  no  re- 
muneration for  his  services,  it  was  held  that  he  was  a  joint 
owner  of  the  money,  and  not  a  '  clerk  or  servant,'  liable  to  be 
indicted  for  embezzlement  under  the  act.8 

"  So,  in  J2.  v.  Waite*  the  accused  was  a  member  of  a 
friendly  society,  of  which  he  was  also  clerk  or  secretary.  The 
society  met  periodically  for  the  despatch  of  business,  and  the 
moneys  were  first  received  by  the  collector,  and  then  handed 


1  Under  the  7  and  8  Geo.  4,  C.  29, 
§  47,  the  offence  could  not  be 
proved  unless  the  money  or  other 
chattel  was  received  by  the  clerk  or 
servant  "by  virtue  of  such  employ- 
ment." But  now  it  is  immaterial 
whether  or  not  it  was  the  duty  of 
the  servant  to  receive,  or  whether  or 
not  he  had  authority  to  do  so.  The 
case  of  R.  v.  Hastie,  32  L.  J.,  M.  C. 
63;  S.  C.,  7  L.  T.  Rep.,  N.  S.  695; 
9  Jur.,  N.  S.  235;  11  W.  R.  293;  1 
L.  and  C.,  C.  C.  269;  9  Cox,  C.  C. 
264;  27  J.  P.  85,  turned  upon  the 
former  enactment.  There,  by  the 
rules  of  a  certified  building  society, 
mortgages  were  directed  to  be  made 
to  the  trustees,  and  the  redemption 
money  to  be  paid  to  the  directors; 
and  it  was  no  part  of  the  secretary's 
duty,  as  prescribed  by  the  rules,  to  re- 
ceive subscriptions  or  other  moneys 
for  the  society.  The  course  of  busi- 
ness, however,  was  that  the  manage 
merit  of  the  society  was  left  almost 
entirely  to  the  secretary,  and  he  fre- 


quently received  subscriptions.  The 
mortgages  were  made  to  the  trustees, 
but  when  redeemed,  the  money  was 
paid  to  the  secretary  for  the  trustees. 
The  secretary  having  embezzled  the 
redemption  money  upon  a  mortgage 
so  paid  to  him;  it  was  held,  upon 
an  indictment  under  the  above  sec- 
tion, that  the  jury  were  warranted 
upon  this  evidence  in  finding  that 
the  money  was  received  by  virtue  of 
his  employment,  and  for  his  masters. 
See  also  R.  v.  Miller,  2  M.,  C.  C.  R. 
249;  R.  «.  Tongue,  3  L.  T.  Rep  ,  N. 
8.  415;  S.  C.,  8  Cox,  C.  C.  386;  30 
L.  J.,  M.  C.  49;  24  J.  P.  723;  Bell, 
C.  C.  289;  R.  v.  Spencer,  Russ.  and 
Ry.  299;  R.  v.  Thorley,  1  Moo.,  C. 
C.  343;  R.  v.  Prince,  1  Moo.  and  M. 
21. 

*  R.  v.  Bren,  9  L.  T.  Rep.,  N.  S. 
452;  S.  C.,  27  J.  P.  804;  9  Cox,  C. 
C.  398;  33  L.  J.,  M.  C.  59;  3  N.  R. 
176;  12  W.  R.  107;  1  L.  and  C.,  C. 
C.  346. 

3  2  Cox,  C.  C.  245. 


§  ^.J  FUNCTIONS,    ETC.,   OF   OFFICERS.  241 

to  the  accused  in  his  capacity  as  clerk,  to  be  paid  by  him  to 
Messrs.  Chuck,  the  bankers  of  the  society.  On  one  occasion 
the  accused  suggested  that,  the  interest  allowed  by  the  bank 
IK- ing  very  small,  he  could  place  their  money  with  a  firm  in 
London,  where  a  better  interest  could  be  obtained,  and  he 
ultimately,  with  the  consent  of  the  society,  drew  all  the 
money  from  the  bank  for  the  purpose,  as  he  alleged,  of  so 
investing  it ;  but  instead  of  so  doing,  he  appropriated  it  to 
his  own  purposes,  and  it  was  then  discovered  that  no  such 
firm  as  he  had  represented  existed ;  and  Coleridge,  J.,1  held 
that  an  indictment  for  embezzlement  could  not  be  sustained. 
And  where  the  defendant  was  a  member  of,  and  also  secretary 
to,  a  benefit  society,  and  he  derived  a  percentage  from  the 
funds  of  the  society  and  in  the  course  of  his  duty  he  received 
a  sum  of  money  from  the  members  of  the  society,  which  he 
ought  to  have  paid  into  an  account  in  the  bank,  kept  in  the 
names  of  certain  other  members  of  the  society,  but  instead  <>t 
so  doing,  he  appropriated  it ;  it  was  held  that  he  could  not  be 
convicted  of  embezzling  the  money  upon  an  indictment 
charging  him  to  be  a  servant  of  A.  B.  (an  ordinary  member 
of  the  society)  and  others,  and  laying  money  as  that  of  the 
said  A.  B.  and  others.  So,  where  the  treasurer  of  a  friendly 
society,  whose  duty  it  was  to  receive  the  moneys  paid  into 
the  society,  and  hold  them  to  the  order  of  the  secretary, 
countersigned  by  the  chairman  or  a  trustee,  and  to  account 
whenever  called  upon,  but  who  had  no  salary  or  remunera- 
tion paid  to  him  for  his  services,  misappropriated  the  funds 
of  the  society ;  it  was  held  that  he  was  not  a  clerk  or  servant 
within  the  meaning  of  the  act.9  But  in  a  case  where  the 
trustees  of  a  building  society  borrowed  money  for  the  pur- 
poses of  their  society  on  their  individual  responsibility:  the 
money  was  on  one  occasion  received  by  the  secretary,  and 
(.•mbezzled  by  him  ;  it  was  held  that  he  might  be  charged  as 

1  See  28  J.  P.  2,  nnd  seeR.  v.  Bur-  »  R.  t>.  Tyrte.  38  L.  J.,  M.  C.  58; 

gess,  32  L.  J.,  M.  C.  185;  S.  C.,  19  S.  C.,  19  L.*T.  Rep..  N.  S.  657;  Law 

Jur.,  N.  S.  582:  8  L.  T.  Rep.,  N.  8.  Rep.,  1  C.-  C.  R.  177;  17  W.  R  :•,:;.» : 

•r.r>:  11  W.  R.  602;  1  L.  nncl  C.,  C.  33  J.  P.  134.     See  R.  v.  Murphy.  4 

C   099 ;  9  Cox.  C.  C.  302;  27  J.  P.  Cox.  C.  C.  101;  R.  v.  Hall,  1  Moo. 

ik&  a-  t.)  t'nnn  of  indictment  where  C.  C.  474. 
there  LUC  iu>  in:- 


242  Tin:  LAW  OF  BUILDING  ASSOCIATIONS.       [CH.  ix. 

the  servant  of  W.  and  others,  W.  being  one  of  the  trustees 
and  a  member  of  the  society.1 

"But  if  the  accused  has  received  a  remuneration  fur  his 
services,  it  seems  that  the  mode  in  which  lie  received  it  is 
immaterial,  so  that,  in  fact,  in  other  respects  the  relationship 
of  master  and  servant  existed  between  the  parties.  Thus 
where  the  defendant  was  employed  to  obtain  orders  for  the 
prosecutor,  being  paid  by  commission,  and  being  at  liberty  to 
take  orders  for  others  than  the  prosecutor,  it  was  held  that 
he  was  liable  to  be  indicted  for  embezzlement  as  a  servant  or 
clerk."  And  where  A.  agreed  to  engage  B.  as  agent  or 
traveller  for  the  sale  of  coals,  at  a  salary  of  one  guinea  per  week, 
and  Is.  per  ton  as  commission  on  coals  sold,  and  6d.  per  ton  on 
coals  sold  to  dealers  procured  by  B.  as  customers ;  and  B. 
agreed  to  collect  all  moneys  in  connection  with  his  orders,  the 
commission  not  to  be  due  until  the  money  was  received  by  A.  ; 
moneys  received  by  B.  not  to  be  kept  more  than  one  week  in 
his  hands;  it  was  held,  that  under  that  agreement  B.  was  a 
clerk  or  servant  within  the  meaning  of  the  act.  After  15. 
had  been  in  A.'s  service  about  a  year  the  prisoner  was  desirous 
of  selling  coals  by  retail  on  his  own  account,  and  A.  agreed 
to  supply  him  with  coals,  and  then  made  the  following 
alteration  in  their  agreement :  '  As  you  are  now  going  into 
the  retail  coal  trade  on  your  own  account,  we  think  it  best  to 
have  a  proper  understanding,  and  in  future  we  pay  you  a 
commission  only ;  your  salary  will  be  stopped  from  this  date. 
There  is  a  large  amount  against  you,  and  we  request  you  to 
do  all  you  can  to  get  it  in ;'  and  it  was  held,  that  under  this 
new  agreement  B.  was  not  a  clerk  or  a  servant  within  the 
statute.1  From  this  case  it  should  seem,  that  if  the  secre- 
tary of  a  building  society  received  a  percentage  on  the 
receipts  of  the  society,  and  is  subject  to  the  orders  of  the 
directors  or  trustees  of  the  society,  he  will  be  a  clerk  or  ser- 
vant, and  as  such,  will  be  liable  to  be  indicted  if  he  should 

1  R.  v.  Bedford,  21  L.  T.  Rep.,  J.  P.  618;  R.  «.  Batty,  2  Moo.  C.  C. 

N.  S.  508;  8.  C.,  11  Cox,  G.  C.  367.  257. 

»R.  «.  Tite,  SOL.  J.,  M.  C.  142;  »  R.  v.  Bowers,  35  L.  J.,  M.  O. 

S.  C.,  4  L.  T.  Rep.,  N.  S.  259;  7  Jur..  207;  S.  C.,  14  L.  T.  Rep.,  N.  S.  671; 

N.  S.  556;  8  Cox,  C.  G.  458;  1  Leigh  Law  Rep.,  1  C.  C.  41:  12  Jur.,  N. 

and  C.,  C.  C.  29;  9  W.  R.  554:  25  S.  671;  14  W.  R.  803;  30  J.  P.  452. 


§  223.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  243 

embezzle  the  funds.1  But  a  mere  agent,  who  is  employed  by 
a  building  society  to  conduct  the  business  at  a  branch  office, 
and  who  receives  his  remuneration  by  way  of  commission 
on  the  amounts  received  by  him,  would  probably  not  be  con- 
sidered as  a  clerk  or  servant  within  the  meaning  of  the  act." 
Thus  where  the  prisoner  was  employed  by  a  coal  merchant 
under  an  agreement,  whereby  '  he  was  to  receive  Is.  per  ton 
procuration  fee,  payable  out  of  the  first  payment ;  four  per 
cent,  for  collecting ;  and  3d.  on  the  last  payment,  collections 
to  be  paid  on  Friday  evening,  before  5  P.M.,  or  Saturday 
before  2  P.M.,'  and  he  received  no  salary,  and  was  not  obliged 
to  be  at  the  office  except  on  Friday  or  Saturday  to  account 
for  what  he  had  received,  and  was  at  liberty  to  go  where  he 
pleased  for  orders ;  it  was  held  that  he  was  not  a  '  clerk  or 
servant.' "  ' 

Compensation  of  Officers. 

§  223.  The  compensation  of  officers  in  building  associa- 
tions is  either  fixed  by  provisions  of  the  charter  or  by-laws, 
or,  more  generally,  left  to  the  discretion  of  the  directors,  or 
based  upon. the  terms  of  express  contract.  Where  the  charter, 
or  other  fundamental  law,  fixes  the  salaries  of  any  officers, 
allowance  in  excess  of  the  same  cannot  be  made  by  the  cor- 
poration or  its  directors  ;4  and  an  express  charter  authorization 
to  fix  the  salaries  of  its  officers  applies,  in  such  case,  only  to 
salaries  not  fixed  by  the  charter.* 

1  And  see  R.  v.  Bren,  9 L.  T.  Rep.,  1  L.  and  C.,  C.  C.  13;  R.  v.  Walker, 

N.  8.  452;  S.  C.,  27  J.  P.  804;  33  27  L.  J.,  M.  C.  207;  IDear.  and  B., 

L.  J.,  M.  C.  59;  12  W.  R.  107;  9  C.  C.  R.   600;  R.  t>.  Goodbody,  8 

Cox,  C.  C.  898;  3  N.  R.  176;  1  L.  Car.  and  P.  665;  34Engl.  C.  L.  Rep. 

and  C.,  C.  C.  346;  R.  v.  McDonald,  575. 

5  L.  T.  Rep.,  N.  S.  330;  S.  C.,  31  3  R.  v.  Turner,  11  Cox,  C.  C.  551. 

L.  J.,  M.  C.  67;  7  Jur.,  N.  S.  1127;  4  Field,  Corp.,  §  222;  cit.  Carr  t>. 

9  Cox,  C.  C.  10;  10  W.  R.  21 ;  1  L.  City  of  St.  Louis,  9  Mo.  191;  Utica 

and  C.,  C.  C.  85;  R.  v.  Proud,  31  Insurance     Co.     v.     Bloodgood,    4 

L.  J.,   M.  C.  71;  8.  C..5L.  T.  Rep.,  Wend.    652;   Godbold  v.   Bank  of 

N.  S.  331;  9  Cox,  C.  C.  22;  10  W.  Mobile,  11  Ala.  191;  Carr  t>.  Cbar- 

R.  62;  1  L.  and  C.,  C.  C.  97;  25  J.  tier's  Coal  Co.,  25  Pa.  St.  337;  St. 

P.  245.                         •  Luke's  Cburcb  v.  Matthews,  4  Des. 

•  See  R.  o.  May,  30  L.  J.,  M.  C.  Ch.  578. 

81;  S.  a,  7  Jur.,  N.  S.  147;  8  L.  T.  s  Angell    and    Ames,    Corp.,    § 

Rep.,  N.  S.  680;  8  Cox,  C.  C.  421i  317. 


24:4  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  IX. 

§  224.  "Where  the  salary  is  annexed  to  the  office,  either 
by  charter  or  by-law,  the  incumbent's  right  to  it  stands  ujmii 
the  ground  of  distinct  record  agreement,  established  by  hi& 
election  to,  and  acceptance  of,  the  position.1  But  if  the 
duties  incident  to  such  an  office  become  enlarged,  and  what 
he  receives  appears  to  him  inadequate,  whilst  he  is  free  to 
resign,  he  cannot  claim  additional  compensation.  The  salary, 
where  annexed  to  the  office,  belongs  to  the  person  legally 
elected  to  fill  it,  the  officer  dejure,  whether  also  de  facto  or 
not.' 

§  225.  A  claim  of  compensation  resting  upon  special  con- 
tract with  a  de  facto  board  of  directors,  will  not,  after 
services  performed,  be  affected  by  the  illegality  of  their 
tenure  of  office,  where  the  contract  was  made,  on  the  part  of 
the  claimant,  in  ignorance  of  this  circumstance,  and  without 
collusion.1 

Implied  Liability  of  Society  for  Compensation. 

§  226.  In  most  cases,  the  power  to  provide  suitable  com- 
pensation for  officers,  directors,  and  committees,  is  vested  in 
the  Board  of  Directors.  In  such  case,  and  where  no  salary 
has,  in  fact,  been  provided,  and  no  express  contract  entered 
into,  much  must  depend  upon  the  custom  obtaining  in 
this  class  of  corporations,  and  the  particular  one  sought  to 
be  made  liable,  with  regard  to  compensation  for  the  particu- 
lar services,  and  the  expectations  of  the  parties  justly  growing 
out  of  their  knowledge  of  that  custom.  In  a  general  way,  it 
is  said  that  "  the  agents  of  a  corporation,  like  the  agents  of  a 
natural  person,  are  entitled,  in  legal  presumption,  to  be  paid 
for  their  services  by  their  principal,  the  corporation,  what 
they  are  reasonably  worth."  4  And  it  has,  therefore,  been 

1  1  Dill.,  Hun.  Corp.,  §  233.  against  any  suit  for  services  for  that 

8  See  post,  §  228.  year.— Ib. 

3  St.  Luke's  Church  v.  Matthews,  4  Field,  Corp.,  §  221;  cit.  Com- 

4  Des.  Ch.,  (S.  C.)  578.  In  the  en-  monwealth  Insurance  Co.  «.  Crane, 

suing  year  the  same  clergyman  en-  6  Mete.  64;  Waller  v.  Bank  of  Ken- 

tered  into  a  contract  with  the  same  tucky,  3  .1.  J.  Marsh.  206;  Ehves  v. 

vestry,  after  he  was  apprised  of  the  Ogle,  2  Engl.  L.  and  Eq.  379;  Bill 

illegality  of  their  election,  and  the  v.  Dnreuth,  etc.,  R.  Co.,  1  H.  and 

court,  upon  the  ground  of  collusion,  X.  305;  37  Engl.  L.  and  Eq.  539; 

decreed  a  perpetual  injunction  East  Anglian  R.  Co.  «.  Lythgoe, 


§  226.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  245 

repeatedly  held,  that  an  officer,  duly  appointed,  although  no 
salary  had  been  fixed  for  his  services  by  the  corporation,  may 
recover  for  them  in  assum/psit,  quantum  valebant.1  But  in 
Pennsylvania,  the  doctrine  is  established,  that  corporations 
are  not  liable,  on  a  quantum  meruit,  for  services  performed 
by  an  officer,  and  that,  where  no  salary  is  fixed  by  the  charter 
or  by-laws,  there  can  be  no  recovery  except  upon  an  express 
contract  for  compensation."  Such  an  express  contract  arises, 
either  upon  special  arrangement  between  the  officer  and  the 
association,  or  by  virtue  of  antecedent  resolution  fixing  his 
salary,  and  acceptance  of  the  office  under  its  provisions.  This 
doctrine  has  much  to  commend  it.  On  the  subject  of  com- 
pensation of  officers  of  municipal  corporations,  Dillon  says : 
"  Officers  of  a  municipal  corporation  are  deemed  to  have 
accepted  their  office  with  knowledge  of,  and  with  reference  to, 
the  provisions  of  the  charter  or  incorporating  statute  relating 
to  the  services  which  they  may  be  called  upon  to  render,  and 
the  compensation  therefor.  Aside  from  these,  or  some 
proper  by-law,  there  is  no  implied  assumpsit  on  the  part  of 
the  corporation  with  respect  to  the  services  of  its  officers.  In 
the  absence  of  express  contract,  these  regulate  the  right  to 
recovery,  and  the  amount."  '  If  considerations  of  public  in- 
terest and  morality  have  dictated  such  policy  as  to  municipal 
corporations,  a  policy,  equally  cogent  in  reason  and  principle, 
would  appear  to  urge  its  extension  to  private  corporations.4 
As  for  hardship,  there  would  be  no  more  in  the  latter  case,  than 
in  the  former ;  and  the  moral  obligation  to  remunerate  is  no 
more  restricted  in  the  one  case  than  in  the  other.6  And,  per- 
haps, particularly  in  building  associations,  should  claims  for 
salaries,  without  distinct  by-law  or  contract  stipulation,  be 
discountenanced.  The  mutuality  of  the  whole  scheme,  the 
generally  inopulent  circumstances  of  the  members,  the  great 
interest  which  all  have  in  keeping  down  expenses,  the  heavy 


10  C.   B.    726;    70    Engl.    C.    L.  4  Loan  Association  v.  Stonemetz 

Rep.  29  Pa.  St.  534. 

I  See  preceding  note.  5  In  Pennsylvania  the  theory  of 

II  Kilpatrick    v.    Penrose    Ferry  moral  obligation,  in  such  cases,  is 
jp-  Co.,  49  Pa.  St.  118.  very  much  restricted  by  the  decision 

3 1  Dill.,  Mun.  Corp.,  §  230.  of  the  S.  C.  in  Kennedy's  Ex'rs  v. 

Ware.  1  Pa.  St.  445. 


246  THE  LAW   OF  BUILDING   ASSOCIATIONS.         [CH.  IX. 

loads  which  many  of  the  borrowing  members  have  to  carry, 
and  the  general  obligation  which  every  shareholder  is  under, 
to  contribute,  according  to  his  powers',  to  the  speedy  final 
success  of  the  enterprise,  all  seem  to  point  in  the  same  direc- 
tion. 

A  Director  Cannot  Claim  Extra  Compensation  for  Acts  done  in  the  Lone 
of  His  Duty.     Services  before  Organization. 

§  227.  In  the  case  of  a  director,  elected  where  no  salary 
was  attached  to  the  office  or  particular  function  he  was  called 
upon  to  exercise  as  a  director,  it  has  been  expressly  held,  that 
he  cannot  recover  against  the  association  for  services  rendered 
in  that  capacity,  or  for  such  as  were  incidental  to  his  office ; 
that  where  services  are  rendered  by  a  person  in  the  line  of  his 
legal  duty,1  no  implication  arises  that  they  were  rendered  at 
the  special  request  of  the  party  benefited  by  them  ;  and  that, 
therefore,  a  resolution  passed  by  the  association,  after  the 
services  were  rendered,  that  such  director  be  paid  a  certain 
sum  for  his  services,  was  without  a  consideration,  and  imposed 
no  obligation  on  the  association  that  could  be  enforced  by 
action.4  It  seems  clear,  therefore,  that  directors,  for  services 
they  performed  whilst  acting  in  that  capacity,  are  not,  with- 
out express  stipulation,  to  be  allowed  any  compensation.8  But, 
for  extra  services  rendered,  not  in  the  capacity  of  directors,  it 
seems  that  they  may  claim  it,4  within  a  reasonable  time  of 
their  rendition.6  But  services  rendered  before  organization 
of  the  association  do  not  form  a  valid  consideration  for  a  vote 
of  the  directors  to  pay,  after  complete  organization.' 

1  A  director  in   a  bank  cannot  3  See   also,    Angell    and  Ames, 

claim  a  reward  offered  by  the  bank  Corp.,  §  317;  N.  Y.  R  Co.  v.  Kct- 

f or  the  recovery  of  stolen  properly,  chum,   27    Conn.   170;    Hodges  v. 

because  he  merely  did  his    duty.  Rutland  R.  Co.,  29  Vt.  220. 

Collin  v.  Godfrey,  1  Barn,  and  Ad.  4  See    Chandler    v.     Monmouth 

956:  20  Engl.    C.  L.    514.     And  a  Bank,  1  Green  (N.  J.),  255;  Henry 

resolution  formally  adopted,  allow-  v.    Rutland    R.    Co.,   27  Vt.    435; 

ing  directors  certain  compensation  Shackleford  v.  New  Orleans,   etc., 

for  attendance  on  court,  etc.,  is  in-  R.  Co.,  37  Miss.  202. 

sufficient  to  give  A  director  a  right  6   See    Utica    Insurance    Co.    ». 

to  recover  for  such  services.    Dun-  Bloodgood,  4  Wend.  (N.  Y.)  652. 

stou  v.  Imperial  Gas  Co.,  3  Barn.  •  N.  Y.  R.  Co.   «.  Ketchum,  su- 

and   Ad.  125;  23  Engl.  C.  L.  42.  pra.     But  where  services  were  ren- 

s  Loan  Association  v.  Stonemetz,  dered  for  the  benefit  of  a  corpora- 

29  Pa.  St.  534.  tion,  before  the  completion  of  its- 


§  230.]  FUNCTIONS,    ETC.,    OF   OFFICERS.  247 

De  facto  Officer  Cannot  Claim  Salary. 

§  228.  The  right  of  mere  de  facto  officers  to  claim  com- 
pensation, independently  of  an  express  contract  (in  the  literal 
sense  of  the  word  ;  not  by  virtue  of  a  charter  or  by-law  pro- 
vision, or  resolution  relating  to  the  office),  has  never  been  rec- 
ognized ;  where  there  is  a  salary  annexed  to  the  office,  it  can 
be  drawn  only  by  the  de  jure  officer.1 

Salaried  Officer,  if  Improperly  Removed,  may  Sue  for  Salary. 

§  229.  But  an  officer,  whose  term  is  fixed,  and  to  whose 
office  a  salary  has  been  attached,  in  any  manner  binding  upon 
the  association,  being  improperly  removed,  may  sue  for  the 
amount  of  salary  which  would  come  to  him,  if  allowed  to  re- 
main, between  the  dates  of  his  wrongful  removal  and  of  the 
regular  expiration  of  his  term.8 

Officers  Must  Look  to  Society's  Funds  for  Compensation. 

§230.  Finally,  the  officers  of  building  associations  can 
only  look  to  the  funds  of  the  society  for  their  remuneration, 
and  cannot  recover  the  amount  of  their  salary  or  compensa- 
tion from  any  individual  member  or  director.  If  the  society 
becomes  insolvent,  they  simply  lose  the  sums  due  them.3 
This  was  the  law  even  before  societies  were  incorporated,  and 
as  such  is  clearly  laid  down  in  the  leading  English  case  upon 
the  subject.4  The  surveyor  of  a  building  association  brought 
an  action  against  a  shareholder  and  member  of  the  committee 
of  management  for  a  sum  of  money  due  to  him  for  preparing 
plans,  etc.,  for  six  houses.  It  appeared  that  the  plaintiff  had 
been  duly  appointed  surveyor  of  the  society,  in  accordance 

organization,  in  obtaining  subscrip-  Connecticut  R.   R.  Co. ,  45  N.  H. 

tiotis  and  removing  obstacles  to  its  375. 

organization,  which  were  valuable,  '  See   State  v.  Carrol,    38  Conn. 

and  at  the  request  of  parties  who  471;  Kidder  v.   Bedford  County,  7 

afterwards  became  members  of  it.  S.    and    R.    (Pa.)    386;  Bentley  r. 

and  the  corporation,  after  its  organ-  Phelps.  -,'T  Marl).  (N.  Y.)524;  People 

ization,  accepted  of  such  services  v.  Tiernan,  30  Barb.  (N.  Y.)  193. 

and  received  the  benefit  and  advan-  »  See  I  Dill.,  Mun.  Corp., 

tages  of  the  same,  it  was  held  that  3  Davis,   Law  of  Building,  etc., 

the  person  rendering  the  same  was  Societies,  p.  91. 

entitled  to  recover  of  the  company  4  Alexander  v.  Worman,  30  L.  J., 

therefor  in  an  action  of   assuinpsit  Exch.  198:  3  L.  T.  Rep  ,  X.  S.  477; 

upon  an  implied  promise.     Low  v.  25  J.  P.  312;  6  H.  and  X.  100. 


248  THE   LAW   OF   UL'IUJIXG   ASSOCIATIONS.          [CH.  IX. 

with  the  rules  of  the  society,  by  which  rules  his  duties  were 
defined,  and  by  which  it  was  declared  that  he  should  "receive 
out  of  the  funds  thereof  " — the  society — "  a  fair  and  reasona- 
ble remuneration ;  and  should  any  dispute  arise  as  to  his 
charges,  the  same  shall  be  referred  to  the  decision  of  the 
committee,  which  shall  be  final."  At  a  meeting  of  the  com- 
mittee, the  plaintiff  was  instructed  to  prepare  certain  plans 
and  specifications,  which  he  did,  and  subsequently  he  attended 
several  meetings  for  the  purpose  of  explaining  them  and  re- 
ceiving instructions.  The  defendant  was  present  at  these 
meetings,  but  gave  no  direct  instructions  to  the  plaintiff. 
The  plaintiff,  from  time  to  time,  made  reports  to  the  society 
of  the  progress  of  the  works,  and  addressed  a  letter  "  to  the 
directors,"  asking  payment  of  his  own  as  well  as  the  con- 
tractors' claims,  which  remained  unpaid.  The  society  had 
"  died  a  natural  death"  for  want  of  funds,  and  hence  the  ac- 
tion. In  giving  the  judgment  of  the  majority  of  the  court, 
which  was  in  favor  of  the  defendant,  Martin,  B.,  said :  "  We 
think  the  onus  of  proof  in  this,  as  in  every  other  case  for 
work  and  labor,  is  upon  the  plaintiff,  and  that  he  is  bound  to 
satisfy  the  jury,  either,  first,  that  the  defendant  contracted 
to  pay,  by  which  we  mean  that  he  understood  that  he  him- 
self, or  that  he  in  conjunction  with  the  other  directors,  was 
to  pay  the  plaintiff  for  his  labor.  Such  a  contract  might 
have  been  proved  in  an  infinite  variety  of  ways,  but  we  think 
it  clear  upon  the  evidence  in  this  case  that  the  defendant 
thought  that  lie  was  dealing  with  an  officer  of  the  society, 
and  not  with  a  surveyor  whom  he  was  to  pay  out  of  his  own 
private  funds,  either  solely,  or  in  conjunction  with  others. 
But  secondly,  we  quite  agree  that  if  the  defendant  had  so 
conducted  himself  as  reasonably  to  create  in  the  plaintiff's 
mind  the  belief  that  he  was  to  be  paid  by  the  defendant  for 
his  labor,  it  is  quite  immaterial  whether  the  defendant  him- 
self understood  that  he  was  to  pay.  To  create  a  liability  of 
the  kind,  however,  it  is  of  the  very  essence  of  it  to  establish 
that  the  plaintiff  himself  understood  and  believed  that  he  was 
to  be  paid  by  the  defendant ;  but  the  evidence  satisfies  us 
that  he  had  no  such  belief,  and  that  until  the  society  was 
broken  up,  he  looked  to  the  funds  of  the  society  for  payment, 
and  not  to  the  defendant  or  his  co-directors  at  all.  "We  think 


§  230.]  GENERAL   POWERS  OF  BUILDING   ASSOCIATIONS.         249 

it  is  a  mistake  to  suppose  that  in  societies  of  this  kind  the 
surveyor,  or  secretary  or  the  officers  do  work  and  labor  upon 
the  same  terms  as  professional  men  of  their  class  ordinarily 
do.  They  generally  have  a  much  greater  interest  in  these 
societies  than  the  directors,  and  in  the  great  majority  of  cases 
are  the  individuals  who  get  them  up,  and  at  whose  request 
the  directors  consent  to  accept  the  trust,  and  take  upon  them- 
selves the  liabilities  and  duties  of  their  situation ;  and  it  is 
to  us  very  clear  that  such  officers  discharge  duties  and  per- 
form services,  with  the  understanding  on  all  hands  that  they 
are  to  be  remunerated  out  of  the  funds,  and  that  if  the  funds 
fail,  the  officers  must  remain  unpaid." 


CHAPTER  X. 


GENERAL  POWERS  OF  BUILDING  ASSOCIATIONS. 

§  231.  General  corporate  powers  of  building  associations. 

§  232.  Powers  denned  by  statute,  and  limited  to  purposes  of  incorpora- 
tion. 

§  233.  Perpetual  succession. 

§  234.  The  common  seal ;  its  custody,  use,  effect. 

§  236.  Proof  of  the  common  seal;  estoppel  upon  association. 

§  237.  Necessity  and  significance  of  seal  in  contracts  of  corporation. 

§  238.  Liability  of  association  upon  implied  contracts. 

§  239.  Contracts  entered  into,  etc.,  by  association  directly. 

§  241.  Contracts  entered  into  through  agents.     Officers  are  agents. 

§  242.  Appointment  of  agents,  and  persons  capable  of  becoming  such. 

§  243.  Acts  of  agents  binding  upon  society. 

§  244.  Presumptions  as  to  existence  of  agency. 

§  245.  Persons  dealing  with  agents,  bound,  to  a  certain  extent,  to  take 
notice  of  limits  of  powers.  Estoppel  upon  society. 

§  247.  Unauthorized  contracts  of  agents.     Ratification. 

g  248.  Form  of  execution  by  agent  to  bind  society.      Personal  liability. 

§  250.  Notice  to  agent  or  officer  is  notice  to  society. 

£  '.251.  Delegation  of  authority  by  agents.     Survival. 

§  252.  Society's  liability  for  torts  and  misrepresentations  of  agents. 

§  253.  Agents'  liability  for  interest  on  moneys  collected. 


250  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.  X. 

§  254.  Right  and  liability  to  suits  and  actions.  Employment  of  attor- 
neys. Forms,  etc.,  of  proceedings. 

§  257.  Society  may  sue  on  obligation  executed  to  it  by  wrong  name. 
Misnomer.  Abbreviations. 

§  258.  Necessary  averments  as  to  default  in  suits  against  borrowing 
members. 

§  259.  Computation  of  period  of  default. 

§  260.  Certainty  required  in  defendant's  allegations  of  payments  and 
proof.  Agency. 

§  261.  Averment  of  and  pleas  to  incorporation.     Tender. 

§  264.  Suits  by  members  against  the  society.  Withdrawals,  balances, 
promised  loan,  refusal  to  transfer  shares. 

§  269.  Society  must  be  party  to  bill  in  certain  causes. 

§  270.  Judgment  obtained  after  dissolution  in  action  pending  against 
society. 

§  271.  Nature  and  qualifications  of  the  right  of  ordaining  by-laws. 

§  272.  By-laws  must  conform  with  constitution  and  laws  of  Union  and 
State. 

§  273.  By-laws  must  conform  with  charter  and  purpose  of  incorpora- 
tion,— else  void.  Instances. 

§  278.  By-laws  must  be  reasonable  and  equitable. 

§  279.  By-laws  cannot  have  retroactive  efficacy  as  against  rights  under 
subsisting  contracts. 

§  280.  By-laws  manifestly  contrary  to  interests  of  society,  etc.,  void. 

§  281.  By-laws  restricting  member  from  pursuing  legal  remedies.  Ar- 
bitration. 

General  Corporate  Powers  of  Building  Associations. 

§  231.  Having  thus  reviewed  the  elements  of  which 
building  associations  are  composed,  and  the  machinery  by 
which  they  act,  the  next  step  is,  to  consider  the  nature  of  the 
powers  which,  by  virtue  of  the  franchises  conferred  upon 
them,  they  are  capable  of  exercising.  In  common  with  other 
corporations,  they  possess  the  general  rights  and  privileges, 
and  are  subject  to  the  general  liabilities,  incident  to  corporate 
bodies.  These  attributes  are  (1)  to  have  perpetual  succession  ; 
(2)  to  have  and  use  a  common  seal ;  (3)  to  contract,  grant  and 
receive,  and  hold  real  estate,  in  the  corporate  name ;  (4r)  to 
sue  and  be  sued  in  like  manner ;  (5)  to  make  by-laws,  a  sort 
of  private  statutes,  for  the  internal  government  of  the 
association. 

Powers  Defined  by  Statute,  and  Limited  to  Purposes  of  Incorporation. 

§  232.  Of  these  powers  and  capacities,  in  general,  it  may 
be  said,  that  they  are  all  subject  to  modification  and  limita- 


§  232.]  GENERAL   POWERS   OF   BUILDING    ASSOCIATIONS.         251 

lion  by  the  charter  of  incorporation,  and  the  statutes  under 
which  it  may  be  effected,  or  which  may  be  applicable  to  its 
provisions ;  and  even  when  in  no  degree  restricted  and  cur- 
tailed, can  be  exercised  only  to  effect  the  purposes  for  which 
they  were  conferred  by  the  government.1  But  certain  powers 
being  specifically  granted,  all  those  fairly  and  necessarily 
implied  in,  or  incident  to  the  same,  follow  with  the  grant, — 
as,  likewise,  do  all  those  essential  to  the  declared  object  ;m<l 
purposes  of  the  association;  not  simply  convenient,  but  indis- 
pensable.* To  this  extent,  and  no  further,  goes  the  contract 
implied  between  the  State  and  the  corporation.  It  lends  no 
legitimacy  to  the  transaction  of  other  business,  or  the  use  of 
corporate  powers  for  objects  wholly  without  the  scope  and 
meaning  of  the  charter.  The  corporation  cannot  leave  its 
legitimate  business  in  the  background,  and  assume  unwar- 
ranted functions,  without  rendering  every  step  upon  the 
unauthorized  path  illegal  and  void."  Neither  the  corporation 
nor  its  officers  can  do  any  act,  or  make  any  rule  or  contract, 
or  incur  any  liability  not  authorized  either  expressly,  or  by 
implication,  or  from  the  necessities  of  its  lawful  business. 
All  acts  beyond  the  scope  of  the  powers  granted,  and  all 
powers  granted,  however  explicitly,  under  a  charter  based 
upon  a  general  statute,  which  are  repugnant  to  such  statute, 
are  void,  and  infect,  with  that  inherent  weakness,  whatever 

1  Angell  and  Ames,  Corp.,  §  111;  Conover,  5  Phila.  (Pa.)  18;  Mechan- 

Field,  Corp.,  §  54;  and  see  Mills  v.  ics'  and  Workingmen's  Mutual  Sav- 

Salisbury  Building  and  Loan  Asso-  ings  Bank  and  Building  Association 

ciation,  75  N.  C.  292;  Latham  and  v.   The    Mcriden    Agency    Co.,    24 

wife  v.  Washington  Building  and  Conn.  159. 

Loan  Association,  77  Id.  145;  Her-         'Field,  Corp.,  g§  53,  54;  1  Dill., 

bert  v.  Kenton  Building  and  Savings  Mun.    Corp.,  §  89;   President   :md 

Association  of  Covington,  11  Bush.  Visitors  of  the  Maryland  Hospital 

(Ky.)  296;   Gordon  v.   Winchester  v.  Foreman,  29  Md.  -VJ I. 
Building  and  Accumulation  Fund         3  Building  Association  v.  Conover, 

Association,   12  Id.  110;  Martin  v.  5  Phila.  (Pa.)  18  (the  language  ttted 

Nashville  Building  Association  et  in  this  case  is,  that  the  grant  of  spo- 

al.,  2  Cold.  (Tenn.)418;  Stater.  The  cific  powers  includes  the  riglit  toex- 

Oberlin  Building  and   Loan  Asso-  ercise  those  nectusary  for  the  con- 

ciation,   35  Ohio  St.   258;   State  r.  venient  and  effectual  prosecution  of 

Greenville  Building  Association,  20  the  association's    authorized    I>UM- 

Id.  92:  Faulkner's  App.,  11  W.  N.  ness);  Ashland  Banking  Oo.  r.  l'<  B- 

C.    (Pa.)    48;    Manufacturers'   and  tralia    Mutual  Saving    Fund   &MO 

Mechanics'  Saving  and  Loan  Co.  v.  ciation.  9  Luz.  Leg.  Reg.  (Pa.)  41. 


252  THE   LAW   OF   BUILDING    ASSOCIATIONS.  [CH.  X. 

acts  are  done  by  virtue  of  them.1  But  if  the  acts  are 
merely  ultra  vires,  and  not  actually  prohibited,  and  affect 
the  interests  of  the  stockholders  only,  they  may  be  made 
good  by  their  unanimous  consent.' 

Perpetual  Succession. 

§  233.  What  is  meant  by  the  attribute  of  perpetual  suc- 
cession, is,  that  the  association  has  the  capacity  to  take  and 
hold  property,  without  suffering  interruption  from  the  change 
of  officers,  or  in  the  composition  of  membership.  As  to  such 
new  elements,  taking  the  place  of  outgoing  ones,  the  corpo- 
ration, itself  continuing  unchanged,  and  preserving  its  iden- 
tity throughout  the  allotted  period  of  its  duration,  is  invested 
with  the  power  of  holding  its  property  in  uninterrupted,  or 
perpetual  succession,  during  that  period,  or  for  the  length 
of  time  allowed  by  charter  and  statute.  It  is  merely  a  nec- 
essary corollary  to  the  unity  and  personality  given  to  cor- 
porate bodies, — the  idea  that,  whilst  they  live,  they  constitute 
an  artificial  person,  similar,  in  every  respect,  to  a  natural  one, 
and  has  nothing  to  do  with  immortality  or  perpetuity  beyond 
the  limitation  contained  in  the  charter,  or  in  the  general  stat- 
ute under  which  the  charter  is  granted,  as  to  the  period  of 
corporate  existence.*  Upon  this  principle,  too,  a  mortgage 
given  by  one  of  three  directors  of  a  building  association  to 
the  remaining  two,  vests,  upon  the  resignation  of  one  of  these 
two,  and  the  appointment  of  his  successor,  in  the  remaining 
trustee  and  the  successor,  witho'ut  assignment.4 

The  Common  Seal ;  its  Custody,  Use,  Effect. 

§  234.  The  seal  of  the  association  is  the  stamp,  bearing  a 
certain  device,  adopted  by  the  corporation  for  the  purpose  of 
making  an  impression  upon  wax,  or  other  impressible  sub- 
stance affixed  or  attached  to  instruments  to  be  executed  by 
the  corporation,  or  upon  the  paper  or  parchment  on  which 

1  See  Miller's  Estate,  2  Pearson  s  See  ante,  §  200. 

(Pa.),  248;  Stiles's  Appeal,  9  W.  N.  3  See  Angell  and  Ames,    Corp., 

C.  (Pa.)  83;  Becket  «.  Uniontown  §8. 

Building   Association,   88    Pa.    St.  *  Walker  v.  Giles.  6  C.  B.  662;  13 

211  ;    Manufacturers',  etc.,    Saving  .Tur.  588;   18  L.  .1..  C.  P.  323;  60 

and  Loan  Co.  v.  Conover,  sttpra;  Engl.  C.  L  Rep.  662. 
and  cases  in  notes  to  this  section. 


§  ^35.  J  GENERAL   POWERS   OF   BUILDING   ASSOCIATIONS.        253 

such  instruments  are  written,  as  an  additional  and  solemn  au- 
thentication of  such  instruments.  The  stamp  must  be  such 
as  to  make  an  impression  into  the  wax  or  paper  to  which  it 
is  applied.1  It  is  part  of  the  implied  authority  conferred 
upon  the  president,  to  have  the  custody  of  and  affix  the  seal. 
But  the  by-laws,  or  a  corporate  meeting,  where  they  are 
silent,  may  authorize  any  person,  not  only  to  execute  an  in- 
strument for  the  society,  but  also  to  affix  its  seal ;  and  this 
authority  being  conferred  upon  a  Board  of  Directors,  they  may 
appoint  some  officer  or  agent  to  execute  and  seal  with  the 
common  seal  a  contract  on  behalf  of  the  corporation.2  And 
where  not  only  the  affixing  of  the  seal,  but  also  acknowledg- 
ment in  certain  prescribed  forms,  in  order  to  satisfy  the  re- 
cording laws,  is  required,  the  officer  or  agent  executing  the 
instrument  may  generally  also  make  those  acknowledg- 
ments.3 

§  235.  The  affixing  of  the  seal  should  be  accompanied  with 
the  signature  of  the  president,  as  president,  and  the  secretary, 
as  secretary.4  As  that  of  a  natural  person  to  an  instrument 
makes  it  a  specialty,  so  does  the  addition  of  the  corporate 
seal.6  But  where  the  articles  of  association  of  a  building 
association  authorized  the  president,  secretary,  treasurer,  and 
three  directors  to  sign  all  promissory  notes  to  be  given  to  the 
corporation ;  and  a  mortgage  was  taken  from  a  member,  the 
consideration  of  which  was  paid  by  the  building  association, 
not  in  money,  but  by  giving  the  mortgagor  a  promissory 
note  signed  by  the  officers  above  mentioned,  attaching  some 

1  Herder  c.   Pinkerton,  14  Allen,  facturing  Co.,  15  Wend.  256.     And 

(Mass.)  381;  Warren   v.   Lynch,    5  one  seal  will  suffice,  where  the  whole 

Johns.  (N.  Y.)  230.  committee,  authorized  to  sell  lands 

*  Field,  Corp.,  §  288;  cit.  Jackson  and  make  the   necessary  deeds   in 

•e.  Campbell,  5  Wend.  572;  Damon  the  corporation's  name,  signed  the 

/•.  Gran  by,  2  Pick.  345;  Derby  Canal  instruments.     Decker  n.  Freeman, 

Co.  ®.  Wilmot,  9  East  360;  Bank  of  3  Greenl.  (Me.)  338. 

I  lie  U.  8.  c.  Dandridge,  12  Wheat.  *  Field,  Corp.,  §  289;  cit.  Gordon 

68,    118;    The    President,   etc.,    v.  ».    Preston,    1    Watts    (Pa.),    885; 

Myers,  6  S.  ind  R.  (Pa.)  12;  Clarke  Lovett  v.  The  Steam  Saw  Mill  Asso- 

•o.  The  Imperial  Gas  Co.,  4  B.  and  ciation,  6  Paige's  Ch.  60. 

Ad.  315;  1  N.  and  M.  206:24  Engl.  «  Field,  Corp.,  §g  247,  285. 

C.  L.  Rep.  64;  Leggett  v.  New  Jer-  *  Clarke  r.  Manufacturing  Co..  15 

sey  Banking  Co.,  Snxton's  Ch.  (N.  Wend.    (X.    Y.)  256,    265;    Field, 

J.)  541;  Clark  v.   Woollen  Manu-  Corp. ,  §  288,  note  2. 


254  THE   LAW  OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

device  which  was  afterwards  claimed  to  be  the  seal  of 
the  corporation :  it  was  held  that  the  note  was  negotia- 
ble ;.  that  the  nature  of  the  transaction  showed  that  it  was 
intended  to  be  such ;  that  the  seal  was  not  a  restraint  upon 
its  negotiability,  but  merely  a  mark  of  its  genuineness  ;  ;ui<l 
that  the  validity  of  the  note,  as  such,  in  no  manner  depended 
ui)on  the  seal,  but  upon  the  signatures  of  the  proper,  author- 
ized persons.1  The  apposition  of  the  common  seal  gives  per- 
fection to  the  corporation's  deed,  without  the  further  formal- 
ity of  delivery."  Such  deed,  however,  must  be  under  seal 
and  by  agent,8  though  his  authority  may  be  derived  from 
appointment  not  under  seal.4  And  a  lease  from  a  corpora- 
tion is  void  for  want  of  seal ; 6  but  not  an  authorized  agree- 
ment by  an  agent  to  sell  land,'  or  an  authorized  assignment 
of  a  lease.' 

Proof  of  the  Common  Seal ;  Estoppel  upon  the  Association. 

§  236.  The  seal  affixed  to  an  instrument  does  not  prove 
its  own  authenticity ;  it  must  be  shown  to  be  really  the  seal 
of  the  association.8  But  any  seal,  authoritatively  affixed,  al- 
though not  the  seal  regularly  adopted,  becomes  binding  upon 
it ;  whilst,  conversely,  it  is  not  bound  even  by  the  regularly 
adopted  seal,  if  affixed  without  due  authority.9  The  associa- 
tion may,  undoubtedly,  become  estopped  from  denying  its 
authority  for  a  contract  whose  benefit  it  had  reaped  ;10  yet  it 
must  always  be  allowed  to  show  that  the  instrument  contain- 
ing it  was  not  legally  executed.11  Therefore,  as  the  custody 
and  proper  use  of  the  seal  ought  to  be,  and  usually  are,  pro- 

1  Jackson  et  al.  t>.  Myers  et  al.,  43  8  1   Dill.,   Mun.    Corp.,   §  190; 

Md.  452;  S.  P.  Muth  v.  Dolfield,  43  cit.  Jackson  v.  Campbell,  5  Wend. 

Md.  466;  and  see  Dinsmore  v.  Dun-  572. 

can,    57  N.    Y.    573;    Vermilye   ».  9  Ifr 

Adams  Express  Co.,  21  Wall.  138.  10  See  post,  §§  245-246. 

8  Willis  v.  Jermin,  Cro.  Eliz.  167;  "  1  Pars.,    Contr.,    141.      Thus, 

Cruise,  T.  32,  C.  2,  S.  82.  where    three    directors     were     a 

8  Field,  Corp.,  §  285.  quorum,     and    the    secretary    ob- 

4  Ib.,  §§  188-288,  n.  2,  and  post,  tained,  at  one  time,  the  consent  of 
§  242.  two  to  seal  a  bond,  and,  at  another, 

5  Kinzie  v.  Chicago,  2  Scam.  (111.)  that  of  a  third,  it  was  held  the  bond 
188.  was  not  the  deed  of  the  company. 

*  Legrand      v.    Hampton-Sidney     D'Arcy  v.  Tamar,  Kit  Hill  and  Call- 
College.  5  Munf.  (Va.)  324.  ington  R.  Co..  Law  Rep..  2  ExcJ* 
7  Sanford  «.  Tremlett,  42  Mo.  384.     158;  14  L.  T.  Rep.,  N.  S.  626. 


§  237.]  GENERAL   POWERS   OF   BUILDING   ASSOCIATIONS.         255 

vided  for  by  the  constitution  or  by-laws  of  the  society,  it  is 
•expedient  to  place  an  attestation  upon  every  document  of 
importance  which  has  the  corporate  seal,  stating  affirmatively 
that  the  rules  have  been  properly  observed.  But  if  the  proper 
formalities  have  been  observed  in  affixing  the  common  seal, 
the  only  way  of  invalidating  the  deed,  is,  to  show  that  it  was 
prohibited  by  the  act  or  instrument  incorporating  the  society, 
or  is  EO  foreign  to,  or  inconsistent  with,  the  purposes  for 
which  the  same  was  incorporated,  that  it  is  to  be  deemed  as 
if  it  had  been  so  prohibited.1 

Necessity  and  Significance  of  Seal  in  Contracts  of  Corporations. 

§  237.  It  was  formerly  held  that  corporations  could  con- 
tract, that  their  corporate  consent  could  be  expressed,  only  by 
the  corporate  seal.  But  "  it  is  now  well  settled,  that  acts  of 
a  corporation  evidenced  by  a  vote  are  as  binding  upon  it,  and 
are  as  complete  authority  to  its  agents  in  the  execution  of  the 
will  of  the  corporation  thus  expressed,  as  if  such  will  and 
authority  was  authenticated  by  the  corporate  seal ;  that  it 
may  be  as  well  bound  by  the  acts  of  its  agents  as  if  the  prin- 
cipal was  a  natural  person."'  "And  the  corporate  will  is 
now  seldom  expressed  or  authenticated  by  the  corporate  seal, 
except  in  those  cases  where,  under  similar  circumstances,  it 
would  be  necessary  to  execute  the  instrument  with  a  seal  if 
a  natural  person  were  the  party  executing  it."  ;  Hence, 
"  wherever  the  law  requires  a  natural  person  to  attach  a  seal 
to  the  instrument  executed  by  him,  in  like  cases  only  would 
it  be  necessary  for  a  corporation  to  execute  a  like  instrument 
by  a  corporate  seal.  If  in  the  former  case  the  instrument 
must  be  by  deed,  that  is,  executed  or  authenticated  by  a  .-;  al, 
so,  in  the  latter  case,  should  it  also  be  executed  or  authenti- 
cated by  the  common  seal  of  the  corporation." 4  Indeed,  the 
formalities  requisite  in  the  execution  of  contracts  to  which 
building  associations  are  parties,  are  precisely  analogous  to 

1   Davis,  Law  of  Building,  etc.,  Warren  Plank  Road  Co.,  11  la.  74; 

Societies,  p.  80;  cit.  Power  t.  Hoey,  Petrie   v.    Wright.    14    Miss.   647; 

19  W.  R.  916.  Buckley  v.  Briggs.  30  Mo.  452.    And 

'Field,  Corp.,  §  285;  cit.  Board  see  The  City  of  Davenport  v.  The 

of  Education  v.  Greenebaum,  39  111.  Peoria,  etc. ,  Insurance  Co. ,17  la. 276. 

609;  Ross    v.    City  of    Madison.  1  »Ib.,£283. 

Ind.  98;  Merrick  v.  Burlington   &  4  Ib.,  §  284. 


256  THE   LAW  OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

those  characterizing  the  same  species  of  dealings  between 
private  persons.  What  is  said  in  Field's  Private  Corporations, 
on  this  subject,  is  strictly  applicable  to  building  associations: 
"  If  a  verbal  contract,  relating  to  the  same  subject,  would  be 
good  between  private  persons,  it  would  be  so  between  corpo- 
rations, or  between  corporations  and  private  persons  and  co- 
partnerships. If,  under  the  same  circumstances,  the  contract 
should  be  in  writing,  it  would  be  necessary  in  case  a  corpora- 
tion was  a  party.  If  it  should  b3  under  seal  if  natural  per- 
sons were  parties  to  it,  under  like  circumstances  it  should  be 
under  seal  when  a  corporation  is  a  party.  But  if  the  mode 
of  the  execution  of  contracts  is  prescribed  by  the  statute  or 
fundamental  law  of  the  institution,  that  mode  should  be  fol- 
lowed." '  The  corporate  assent  appearing  to  be  given  to  a 
measure  properly  within  the  scope  of  the  association's  powers, 
whether  by  resolution  or  otherwise,  this  is  sufficient  in  order 
to  bind  the  corporation,  where  the  nature  of  the  contract,  to 
be  valid  in  law,  is  not  such  an  one  as  requires  more  deliberate 
formality. 

Liability  of  Association  upon  Implied  Contracts. 

§  238.  The  common  seal  being  shorn  of  its  ancient  dignity 
and  significance  in  corporation  contracts,  a  building  associa- 
tion becomes  liable  upon  undertakings  either  expressed  by 
it  or  implied  from  its  acts;  and  all  duties  imposed  upon 
it  by  law,  and  all  benefits  conferred  at  its  request,  raise 
implied  promises,  for  the  enforcement  of  which  an  action 
lies.' 

Contracts  Entered  into,  etc.,  by  the  Association  Directly. 

§  239.  Again,  the  contracts  of  a  building  association  may 
be  expressed  by,  or  implied  from,  the  acts  of  the  association 
at  large,  acting,  directly,  in  meeting  assembled  ;  or  acting,  in- 
directly, by  delegation,  through  the  medium  of  its  duly  con- 
stituted officers,  or  authorized  agents. 

1  F.  §  247. — If  a  contract  is  under  *  Bank  of  Columbia  n.  Patterson, 

seal,  it  should  be  signed  by  the  presi-  7  Crunch  (U.  S.),  299  (306);  Bank  v. 

dent  and  secretary,    and  authenti-  Wister,  2  Pet.  (U.  S.)318;  N.  Y.  R. 

cated  -with  the  seal  of  the  associa-  R.  Co.  v.   Schuyler,  34  N.  Y.  30; 

tion  stamped  upon  the  instrument.  North    Whitehall,    etc.,    v.    South 

See  ante,  §  235.  Whitehall,  etc..  8  8.  and  R.  (Pa.)  117. 


§  x!-il.J  GENERAL   POWERS   OF   BUILDING    ASSOCIATIONS.         257 

§  24:0.  From  the  nature  of  the  case,  the  contracts  the  asso- 
ciation, as  a  body,  can  enter  into,  or  become  liable  upon  by 
an  implied  assumpsit  of  the  whole,  acting  directly,  must  be 
very  limited.  Practically,  they  are  probably  narrowed 
down  to  those  entered  into  and  implied  between  the  associa- 
tion and  its  members,  its  officers,  and  the  sureties  of  its 
officers.1 

Contracts   Entered  into,  etc.,  by  Association  Through  Agents.     Offi- 
cers are  Agents. 

§  241.  In  its  dealings  with  the  outside  world,  and  in  most 
of  its  relations  with  its  own  members,  the  building  associa- 
tion, like  any  other  corporation,  is  represented  by,  and  acts 
through,  its  officers  or  agents,  duly  appointed  and  employed. 
For  this  purpose,  and  within  the  sphere  of  his  legitimate  au- 
thority, each  officer,  including  the  directors,  is  an  agent  of  the 
society.  The  directors,  indeed,  "  are  the  most  important  of 
corporate  agents,  as  on  them  usually  devolves  the  manage- 
ment of  all  the  affairs  of  the  corporation.  In  view  of  the 
usual  powers  conferred  upon  them,  they  may  almost  be  said 
to  be  the  corporation,  the  reserved  powers  of  the  corporation, 
in  a  majority  of  cases,  being  the  mere  right  to  annually  ex- 
press, through  the  members  at  large,  the  corporate  will  as  to 
the  policy  and  management  of  the  corporate  affairs,  by  an 
election  of  such  directors  or  managers  as  will  execute  such 
will.'"  Hence,  "  it  is  evident  that  the  directors  of  a  corpo- 
ration, in  whatever  manner  constituted,  are  agents  of  the  cor- 
poration, and,  within  the  scope  of  the  authority  conferred  by 
the  laws  or  regulations  of  the  company  relating  to  them. 
their  acts  are  the  acts  of  the  company."3  It  follows,  that,  in 
addition  to  the  principles  already  pointed  out  as  applicable  to 
the  states  of  the  various  officers  of  building  associations,  those 
of  the  law  of  agency  govern  the  relations  between  the  associ- 
ation and  its  directors  and  other  officers,  acting  as  its  airents. 
as  well  as  between  it  and  agents  employed  for  special  pur- 
poses: and  that,  in  their  representation  of  the  society  before 
the  world,  officers  and  society  and  third  parties  are  governed 
by  the  principles  of  that  law. 

'See    ante,    Chapters    vi.,    vii.,         *  Field.  Corp.,  §  186. 
/u.  8II>..  si  15T>. 


258  THE  LAW   OF  BUILDINO   ASSOCIATIONS.  [(11.    X. 

Appointment  of  Agents,  and  Persons  Capable  of  Becoming  Such. 

§  242.  For  authority  to  act  as  tlio  agent  of  the  association, 
*'  the  record  of  the  corporate  will,  either  as  expressed  by  the 
majority  of  its  members  in  attendance  at  a  corporate  nuvt- 
ing,  or  by  a  majority  of  the  directors  at  a  meeting  duly  called, 
is  the  highest  and  best  evidence,  and  agents  for  any  and  all 
j mi-poses  may  be  thus  appointed  and  constituted,  without  any 
other  written  authority,  or  any  authentication  by  the  corpo- 
rate seal."  l  It  may,  in  general,  be  said,  that  any  person  may, 
by  due  appointment,  be  the  agent  of  an  association."  A  minor 
may  be  employed  as  such  ; 3  and  a  member  of  the  association 
may  act  as  auctioneer  at  a  sale,  and,  while  so  acting,  he  may 
also  be  the  agent  for  the  purchaser,  and  sign  for  him  the  mem- 
orandum required  under  the  Statute  of  Frauds  to  bind  him.4 

Acts  of  Agents  Binding  upon  Society. 

§  2-13.  There  is  this  difference  between  the  agents  of  pri- 
vate persons  and  those  of  a  corporation  (particularly  where 
the  agency  is  the  incident  to  and  co-extensive  with  an  office 
whose  powers  are  a  fixed  quantity),  that,  whilst,  in  the  former 
case,  the  fact  and  terms  of  the  procuration  are  matters  strictly 
between  the  principal  and  agent,  and  to  outsiders  evidenced 
mainly  by  the  acts  and  representations  of  the  agent ;  in  the 
latter,  their  authority  is  either  statutory,  or  matter  of  record, 
to  which  all  have  access  who  may  have  occasion  to  deal  with 
the  agent.6  Acting  within  the  apparent  scope  of  the  authority 
thus  conferred  upon  them,  it  is  a  rule  established  for  the  pro- 
tection of  mankind,  that  their  acts  will  be  presumed  to  have 
been  authorized  by  the  body  they  represent,  and  consequently 
be  binding  upon  it.6  Thus,  where  an  agent  of  an  insurance 
Company  received  from  a  building  association  an  application 
for  insurance  of  a  mortgage  interest  held  by  the  association, 

1  Field,  Corp.,  §  188     Even  for  *  Ib.,  Stoddert  t.  Vestry  of  Port 

the  con veyin <r  of  real  estate,  and  for  Tobacco  Parish,  2  G.  and  J.  (Md.) 

-other  acts  under  seal.  227. 

•  Angell  and  Ames,  Corp.,  §  278;  5  Field,  Corp.,  §§  156-157.     The 

•cit.  Co.  Lit.  52  a;  Emerson  v.  Blou-  distinction,  in  this  respect,  between 

drn,  1  Esp.  142;  Palethorp  r.  Fur  charter  and  by-law  powers  of  offi- 

nace,  2  Esp.  511;  Anderson  t.  San-  cers,  does  not  appear  to  be  sustained 

derson.  2  Stark..  N.  P.  204.  Ib.,  g  158.  and  notes. 

»  Angell  and  Ames:  Corp.,  ubi  *  Ib.,  §  157,  192. 
tupra. 


§  245.]  GENERAL    POWERS   OF    BUILDING    ASSOCIATIONS.        259 

upon  which  application  the  building  association  obtained  from 
him  such  an  assurance ;  the  fact  that  the  agent  had  been  in- . 
structed  by  the  insurance  company  to  take  no  applications  for 
insurance  upon  mortgage  interests,  was  held  not  to  affect  the 
right  to  recover  in  the  building  association,  which  had  no 
knowledge  of  such  a  limitation  upon  the  agent's  powers. 
Upon  the  usages  and  customs  of  insurance  business,  it  had  a 
right  to  presume  that  the  agent,  if  he  appeared  ready  and 
willing,  had  also  the  right  to  take  such  an  application.1 

Presumptions  as  to  Existence  of  Agency. 

§  24-i.  The  same  ground,  however,  of  the  superior  facili- 
ties of  acquiring  certainty  in  the  case  of  corporation  agents 
and  officers,  as  compared  with  the  case  of  agents  for  private 
persons,  precludes  the  doctrine  applicable  to  persons  acting 
for  individuals,  that  an  authority  to  make  a  contract  may 
be  implied  from  his  former  employment  for  the  same  pur- 
poses, from  extending  to  such  as  assume  to  act  as  agents  for 
the  corporation.3  But  where  a  person  assumes  to  exercise 
powers  usually  pertaining  to  and  as  an  officer  or  agent  of  the 
association,  and  within  the  limits  of  the  corporate  powers,  the 
corporation,  or  its  immediate  representatives,  the  Board' of  Di- 
rectors, having  knowledge  of  his  proceedings ;  third  parties 
having  dealings  with  the  association  may  properly  treat  such 
officer  or  agent  as  if  lawfully  appointed,  and  as  rightfully  ex- 
ercising the  duties  of  his  office.3 

Persons  Dealing  with   Agents   Bound,   to   a   Certain  Extent,  to  Take 

Notice  of  Limits  of  Powers.     Estoppel  upon  Society. 

§  245.  It  follows,  equally,  that  parties  dealing  with  either 

officers  or  special  agents,  both  of  whom  are  agents  only  so  far 

as  they  have  authority,  by  virtue  of  the  powers  with  which 

they  are  invested,4  are  required  to  take  notice  of  its  general 

1  Woodbury  Savings  Bank  and  cit.  Merchants'  Bank  v.  State  Bank, 

Building  Association  v.  The  Charter  10  Wall.  604;  Fleckner  v.  Bank  of 

Oak  Fire  and  Marine  Insurance  Co.,  the  U.  S.,  8  Wheat.  338;  Bank  of 

31  Conn.  517.  See  similarly  Mill-  the  U.  S.  ».  Dunn.  6  Pet,  51 ;  U.  S. 

ville  Mutual  Marine  and  Fire  In-  v.  Bank  of  Columbus,  21  How.  356; 

surance  Co.  v.  Mechanics  and  Work-  Baldwin  v.  Bank  of  Newburgh,  1 

ingmen's  Building  and  Loan  Asso-  Wall.  234;  Badger  t>.  Bank  of  Cum- 

ciation,  14  Vr.  (N.  J.)  652.  berland,  26  Me.  428;  Cooke  t>.  State 

4  Field,  Corp.,  §  157.  Bank.  52  N.  Y.  96. 

•  See   Field,    Corp.,   g  20S:    192,         4  Ansrdl  and  Ames,  Corp.,  §  280. 


2GO  THE   LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

extent  and  limits.1  And  if  the  agent,  in  his  capacity  as  such, 
assumes  to  become  a  party  to  a  contract  manifestly  in  excess 
ut  the  same,  the  corporation  will  not  necessarily,  or  without 
further  showing  of  the  required  power  being  granted  the 
agent,  or  acts  of  the  corporation  amounting  to  ratification  or 
estoppel,  be  liable.  A  surety  on  a  bond  given  to  a  building 
association  to  secure  a  loan,  attempted  to  set  up,  as  a  defence 
to  its  enforcement,  an  agreement  made  with  the  agent  of  the 
association,  to  the  effect  that,  upon  the  happening  of  a  certain 
contingency,  he  should  be  released  from  liability  on  his 
guaranty.  It  was  held  that  he  must  establish,  besides  the 
actual  occurrence  of  the  event  contemplated,  the  additional 
fact,  that  the  agent  was,  at  the  time,  acting  within  the  scope 
of  his  authority ;  or  that  his  declarations  were  made  in  the 
course  of  business  which  he  was  authorized  to  transact ;  or 
that  the  agreement  existed  within  the  knowledge  of  the  offi- 
cers of  the  association.3  So,  too,  where  a  mortgage,  offered 
as  security  for  a  loan  applied  for,  was  rejected  by  the  direc- 
tors of  a  building  association,  but  placed  on  record  by  its 
attorney,  without  its  authority  or  knowledge ;  and  where  it 
appeared  that  the  society  had  no  actual  notice  of  the  facts 
until  sued  by  the  mortgagor  named  in  the  mortgage,  nor 
ever,  in  any  way,  had  ratified  the  attorney's  act  in  placing  the 
instrument  upon  record  ;  it  was  held  that  the  building  asso- 
ciation was  not  liable,  and  the  plaintiff  could  not  recover.* 
So,  too,  the  cancellation  of  a  mortgage  by  an  attorney-at-law, 
under  a  supposed  authority  from  the  mortgagee,  where  the- 
evidence  as  to  the  latter's  direction  was  conflicting,  and  a 
mortgage,  which  the  complainant  claimed  was  to  have  been 
substituted  for  the  original  one,  was  never  delivered,  was  held 

1  Field-  Corp..  §  156;  cit.  Zabris-  Building  Association,  9  W.  N.  C 
kie  v.  Cleveland,  etc.,  R.  Co.,  23  (Pa.)  325;  8.  C.  nom.  Jones  v.  Na- 
How.    381 ;    Bank    of    Augusta  v.  tional  Building  Association,  94  Pa. 
Earle,  13  Pet.  587;  Pearce  v.  M.  and  St.  215. 

I.  R.  Co.,  21  How.  441.  3  Con  way  v.  Log  Cabin  Perraa- 

2  Gass  v.  Citizens'  Building  and  nent  Building  Association  of  Bal- 
Loan  Association,  9  W.  N.  C.  (Pa.)  timore  City,  52  Md.  137,  so  decided 
326.     See  also    Selden  v.    Reliable  upon  the  additional  ground  that  an 
Savings  and  Building  Association,  action  of  assumpsit  will  not  lie  to  re- 
32  P.  F.  Sm.  (Pa.)  336;  2  W.  N.  C.  cover  money  promised  to  be  loaned 
481 ;    but    see   James   r>.    National  from  the  intended  mortgagee. 


§  247.]    GENERAL   POWEKS  OF  BUILDING   ASSOCIATIONS.         2C1 

invalid,  as  being  unauthorized,  and  was  set  aside.1  And,  in 
like  mariner,  where  a  member  of  an  unincorporated  loan 
fund  association  made  a  bond  and  mortgage  to  it  for  a  loan, 
part  of  which  he  received,  but  repaid,  upon  being  told  that 
the  sum  was  too  great  for  the  security  furnished,  and,  upon 
executing  a  new  bond  for  a  less  amount,  cancelled  the  ii  rst ; 
it  was  held,  if  the  association  did  riot  assent  to,  or  ratify  the 
cancellation,  they  might  still  maintain  a  writ  of  entry  to  fore- 
close the  mortgage." 

§  246.  And  where  the  limits  of  an  agent's  authority  are 
set  forth  in  a  manner  necessarily  coming  under  the  observa- 
tion of  the  other  party  to  a  contract  in  which  the  agent  exceeds 
those  limits,  the  party  dealing  with  the  agent  is  bound  to 
take  notice  of  such  limits.  Thus,  the  powers  of  an  agent  of 
a  building  association,  conducting  a  sale  of  mortgaged  prem- 
ises under  an  appointment  from  the  mortgagee,  must  be 
found  in  the  mortgage  authorizing  the  sale ;  and  any  repre- 
sentations or  agreements  made  by  such  agent,  beyond  the 
powers  contained  in  the  mortgage  authorizing  such  sale,  do 
not  bind  the  mortgagee." 

Unauthorized  Contracts  of  Agents.     Ratification. 

§  247.  For  if  an  officer  or  agent  exceed  his  power  in  enter- 
ing into  contracts  (remembering,  however,  that  these  include 
all  the  necessary  and  appropriate  means  of  carrying  out  the 
purposes  of  the  agency),  these,  if  executory,  will  be  void  as  to 
the  association,  if  ultra  vires  /  and  voidable,  if  merely  in  ex- 
cess of  the  agent's  powers.  But  if  executed,  the  corporation, 

1  The  Tradesmen's  Building  and  etc.,  Association  v.   Houseman,  89 

Loan  Association  of  Camden,  N.  Pa.  St.  261. 

J.  v.  Thompson  etal.,  4  Stew.  (N.  a  Baxter  v.  Mclntire,  13  Gray 
J.)  536;  5  Id.  133.  A  release  of  (Mass.),  168.  Upon  the  trial  of  a 
mortgaged  premises  to  a  person  hav-  writ  of  entry  to  foreclose  a  mort- 
ing  no  actual  notice  of  the  assignment  gage,  defendant  cannot  object  to 
of  the  mortgage,  is,  by  statute,  valid,  the  introduction  in  evidence  of  a 
if  such  assignment  has  not  been  re-  bond  corresponding  to  that  de- 
corded.  Ib.  The  society's  solicitor,  scribed  in  the  condition  of  the  mort 
acting  ultra  vires  in  the  delegation  gage,  except  in  being  for  a  less  sum 
of  his  functions,  does  not  bind  the  and  dated  one  day  later.  Ib. 
society  to  the  acts  of  a  third  party  3  Lamm  r.  The  Port  Deposit 
so  as  to  exonerate  the  recorder  Homestead  Association  of  Cecil 
from  liability.  Peabody  Building,  County,  49  Md.  233. 


262  THE   LAW   OF   BUILDING   ASSOCIATIONS.          fCH.   X. 

having  received  the  benefit  of  the  agent's  transgression  of  his 
own  powers,  holding  the  beneficial  result  of  the  contract  or 
the  instrument  as  price  for  property  sold,  or  the  like,  cannot 
be  heard  to  deny  his  authority,  where,  under  the  society's 
general  powers,  the  contract  might  have  been  made. '  Where, 
therefore,  one  has  been  induced  to  become  a  surety  upon  a 
promissory  note  to  a  building  association,  through  the  repre- 
sentation and  undertakings  of  its  secretary,  in  its  behalf, 
that  he  should  be  liable  only  until  an  insurance  could  be 
placed  upon  the  borrowers  house  and  deposited  with  the 
association,  the  latter  cannot  set  up  a  want  of  authority  in 
the  secretary  to  make  the  contract,  as  against  a  defence  made 
under  its  terms.  It  cannot  have  the  benefit  of  the  security, 
and,  at  the  same  time,  repudiate  the  contract  by  means  of 
which  it  was  obtained.  It  must  do  one  of  two  things, 
either  reject  the  whole,  or  stand  bound  by  the  whole.2 

Hence,  an  acceptance  of,  or  an  omission  promptly  to  dis- 
avow, the  act  of  an  agent  who  has  transcended  his  authority, 
makes  it  the  act  and  contract  of  the  association.  Thus  where 
the  secretary  of  a  building  association  made  a  contract  with  a 
borrower  to  insure  the  mortgaged  premises,  and  failed  to  do 
so  before  a  loss  through  fire  occurred ;  and  where  the  secre- 
tary had  been  making  similar  contracts  with  others,  for  some 
time,  having  himself  no  personal  interest  in  the  insuring,  and 
the  society  received  the  benefits  accruing  from  such  contracts 

1  1  Pars.,  Contr.,  p.  *139;  see,  presumed;  whereas,  in  the  latter, 

however,  post,  §  299,  note.  there  being  no  evidence  that  the 

8  James  v.  The  National  Building  agent  was  even  such  ("  he  told  me 

Association,  9  W.  N.  C.  (Pa.)  325;  he  was  secretary  of  the  associa- 

S.  C.  nom.  Jones  v.  National  Build-  tion,")  and  there  being  no  proof  of 

ing  Association,  94  Pa.  St.  215.  the  knowledge  of  the  officers  of  the 

The  only  possible  ground  upon  nature  of  the  bargain,  or  of  their 

which  this  case  can  be  distinguished  consent  to  it,  the  fact  of  their  igno- 

from  that  immediately  following  it,  ranee  of  it,  and  of  remissness  of  the 

ib.,  page  326  (see  Gass  v.  Citizens'  defendant  in  not  ascertaining  any- 

Building  and  Loan  Association,  9  thing  beyond  the  agent's  represen- 

W.  N.  C.  326,  ante,  §  245),  is  that  tations,  and  in  no  wise  bringing  his 

in  the  former,  the  contract  having  bargain  to  the  notice  of  the  society, 

been  with  an  officer  of  the  society,  became  an  element  in  exonerating 

the  knowledge  of  its  managing  offl-  the  building  association  from  being 

cers  of  the  details  of  the  contract,  limited  by  it.  See  also  Kent  0.  Quick- 

and  their  implied  assent  to  it,  is  silver  Mining  Co. ,  78  N.  Y.  159. 


§  248.]  GENERAL   POWERS   OF   BUILDING    ASSOCIATIONS.         263 

without  objection  ; — it  was  held  that  it  might  be  inferred 
that  he  acted  with  the  knowledge  of  the  directors,  and  was 
authorized  to  make  such  contracts,  and  that  the  society  was 
estopped  from  denying  its  own  power  to  make  it1 

Form  of  Execution  by  Agent  to  Bind  Society. 

§  248.  In  order  to  make  an  agent's  or  officer's  contract  in 
writing  binding  upon  the  association,  u  he  must  express  by 
some  form  of  words  that  the  writing  is  the  act  of  the  princi- 
pal, though  done  by  the  hand  of  the  agent.  If  he  does  thi.s, 
the  principal  is  bound,  and  the  agent  is  not."  J  If  he  fail  to 
give  the  parties  with  whom  he  is  dealing  to  understand  that 
he  is  acting  for  another  and  binding  another,  and  not  himself, 
he  will  be  liable  as  principal,3 — as,  also,  where  the  per.-soij 
assumes  to  act  on  behalf  of  an  association  not  yet  existing,4 
even  though  it,  when  organized,  adopts  the  contract.5  If  the 
contract  be  in  writing,  the  name  of  the  association  should 
appear  in  the  body  of  the  instrument  as  the  real  contracting 
1  tarty,  and  its  officer  or  agent  should  sign  as  such.  Thus 
where  a  promissory  note  was  in  the  following  form : 

"MIDLAND  COUNTIES  BUILDING  SOCIETY,  No.  3, 

"  BIRMINGHAM,  Sept.  1,  1856. 

"  One  month  after  demand  we  jointly  and  severally  prom- 
ise to  pay  J.  B.  the  sum  of  £120,  with  interest,  etc.,  for 
value  received.  "  W.  R.  H.  )  ™ 

"  S   I)  S      (  Trustees. 

"  W.  D.  FISHER,  Secretary" 

1  Chicago    Building    Society   c.  27;    Gordon  v.   Preston,   1   Watts 

Crowell,  65  111.  453.    It  was  further  (Pa.),  385. 

held,  that  tae  society  had  actually  8  See  Gray,  J.,  in  Tucker  Manu- 

the  power  to  make  the  contract  as  facturing  Co.  n  Fairbanks,  9S  M.i-< 

an  incident  to  the  power  of  taking  101.     In  Pennsylvania,  the  person 

security,  and  that  upon  its  failurp  signing  as  agent  must  sign  the  name 

to  carry  out  the  agreement,  it  was  of  his  principal.  Campbell  n.  Baker, 

luilile  to  damages,  the  measure  of  2  W.  83  (84).     Otherwise  he  is  per- 

which  should  be  the  sum  or  dividend  sonally  liable,  although  the  princi- 

the  insurance  company  would  have  pal's  name  is  disclosed  intheinstru- 

been  able  to  pay  if  the  insurance  ment.     Quigley  v.  De  Haas,  82  Pa. 

had  been  perfected  before  loss,  and  St.  2<!7.            3  Field.  Corp..  t  210. 

not  the  whole  amount  agreed  upon  *  Ib.,  §  178;    Herod  ».  Hodman, 

as  insurance.     Ib.     See  also  Kelsey  16  Ind.  241. 

r.     National    Bank    of    Crawford  »  Kellner  r.  Baxter.  L.  R..  2  C. 

Co  ,    69  Pa.    St.    426;     Predin  v.  P.  174:  Brocks  et  al.  c.  McCoy,  5 

Durbarry,   14  Serg    and  R.   (Pa.)  Sneed  (Tenn.),  602. 


THE   LAW   OF   BUILDING    ASSOCIATIONS.  [cii.    X. 

Fisher  was  held  personally  liable,  the  mere  addition  of  the 
word  "secretary"  to  his  name  not  cutting  down  his  liability. 
and  the  signature,  from  its  position,  showing  nothing  like  a 
counter-signature  as  secretary  merely.1 

§  249.  But  if  the  whole  instrument  evinces  the  purpose 
to  act  for  the  association,  and  there  are  no  words  disclosing 
an  intention11  to  assume  a  personal  liability,  the  association, 
not  the  agent,  will  be  bound  thereby,  although  he  sign  his 
own  name  and  affix  his  own  seal.  This  creates,  however, 
only  a  simple  contract  On  the  part  of  the  association,  valid,  as 
to  it,  so  far  as  it  goes,  the  private  seal,  in  such  case,  being 
nugatory  ;  *  for  the  deed  of  a  corporation  must  be  under  its 
corporate  seal.4  Thus,  where  a  deed  was  written  throughout 
as  that  of  the  corporation,  by  an  attorney  having  full  and 
complete  authority  thereto,  and  he,  in  executing  it,  declared 
he  did  so  on  behalf  of  the  corporation,  but  went  on  to  say, 
"  in  witness  whereof  I  set  my  hand  and  seal,"  and  in  the 
acknowledgment,  stated  it  to  be  "his  free  act  and  deed."- 
this  was  his  deed  only,  and  did  not  pass  the  company's  land.5 
But  in  Maryland  the  acknowledgment  of  a  mortgage  by  an 
attorney  of  a  corporation  "  to  be  his  act  and  deed,"  was 
held  to  be  a  substantial  compliance  with  the  provisions  of 
the  Code,  upon  the  circumstances  of  the  case.8  The  court 
being  bound,  in  construing  an  instrument,  to  look  at  the 
whole  of  it,T  it  clearly  appeared  that  the  instrument  was,  by 

1  Bottomry  v.  Fisher,  31   L.  J.,  payable  to  "  A.  B.,  treasurer,"  and 

Exch.  417;  S.  C.,  6  L.  T.  Rep.,  N.  endorsed  by  him  in  the  same  way, 

S.  688;  1  H.  and  C.  211;  see  also  creates  no  personal  liability. 

Allan  v.  Miller,  22  L.  T.  Rep.,  N.  *  Parol  evidence  is  admissible,  in 

S.  825;  Price  T.  Taylor,  29  L.  J.,  cases  of  doubt,  to  show  the  facts  and 

Ex.  331;  6  Jur.,  N.  S.  402;  2  L.  T.  the  intention  of  the  parties;  as  that 

Rop.,  N.  S.  221;  5  H.  and  N.  540;  the  principal    and  not    the  agent 

Davis,  Law  of  Building,  etc.,  Socie-  should  be  bound.     Field,  Corp.,  § 

ties.   pp.   101,   102,   105.     But  see  198. 

Field,  Corp.,  §  212;  cit.  Fuller  «.  « Ib.,  §  197;  1  Dill.,  Mun.  Corp., 

Hooper,  3  Gray,   334;  Slawson  v.  §452;  1  Pars.,  Contr.,  p.  *141. 

Loring,  5  Allen,  340;  that  the  name  4  Koehler  «.  Iron  Co.,  2  Black, 

of  the  corporation  being  printed  in  715. 

the  margin,  though  not  appearing  *  Brinlsy  v.  Mann,  2  Cush.  337. 
in  the  body  of  the  instrument,  is  6  The  Frostburg  Mutual    Build- 
sufficient.    And  see  Ib.,  cit.  Bank  ing  Association  v.  Brace  et  al.,  51 
of  New  York  v.  Bank  of  Ohio,  29  Md.  508. 
N.  Y.  619,  that  a  note  being  made  '  Kelly  v.    Rosenstock,   45   3Id 


§  xJol.J  GENEKAL    POWERS    OF    BUILDING    ASSOCIATIONS.         265 

all  parties,  intended  and  understood  to  be  the  corporation's 
mortgage,  and  the  use  of  the  possessive  pronoun  "his"  for 
"its"  was  unquestionably  a  mere  mistake,  which  was  cured 
upon  the  principle,  mala  grammatica  non  mtiat  legem. 

Notice  to  Agent,  or  Officer,  is  Notice  to  Society. 

§  250.  Notice  to  an  agent,  in  the  transaction  for  which 
he  is  employed,  is  notice  to  the  principal,  both  in  equity  and 
at  law.1  And  where  the  agency  is  a  joint  one,  as  that  of  the 
directors,  knowledge  of  a  material  fact  conveyed  by  a  director 
to  the  board,  at  a  regular  meeting,  is  notice  to  the  associa- 
tion." So,  likewise,  is  notice  to  any  of  the  directors  whilst 
engaged  in  the  business  of  the  association ; 8  but  not  where 
he  is  not  so  engaged.4  Nor  is  a  notice  published  in  a  news- 
paper,6 where  the  subject  matter  is  not  such  as,  by  law,  is 
ordained  to  be  notified  in  that  manner,  in  which  case  the 
notice  affects  the  principal  and  agent  alike.  A  mere  private 
communication  of  a  fact  to  a  director,  or  his  knowledge  of  it 
from  rumor,  is  not  notice  to  the  board  unless  he  communicate 
it."  Neither  will  the  private  knowledge  of  one  of  the  direc- 
tors (and  actuary),  that  certain  shares  have  been  assigned  or 
encumbered,  be  deemed  notice  of  the  fact  to  the  association, 
where  the  apparent  ownership  of  the  shares  remains  in  the 
assignor,  and  he  is  by  the  association  recognized  as  the 
owner.7  But  "a  subsequent  Board  of  Directors  is  to  be 
considered  as  knowing  all  the  circumstances  communicated 
or  known  to  a  previous  board."  And,  as  to  such  matters,  no 
change  in  the  directors  can  render  a  new  notice  necessary.8 

Delegation  of  Authority  by  Agents.     Survival. 

§  251.  The  power  of  agents  to  delegate  their  authority  is 
confined  to  such  cases  in  which  it  must  be  implied ;  as  when 
it  is  indispensable  in  law,  in  order  to  accomplish  the  end  :  <>r 
it  is  the  ordinary  custom  of  the  business  contemplated ;  or  it 

389;  in  this  case,  too,  the  omission  knowledgment  under  the  statute. 

of  the  date  of  the  acknowledgment  Second  Manhattan  Buildini: 

was  held  not  to  be  fatal;  as  in  New  ciation  v.  Hayes,  4  Abb.  App.,  Dec. 

York,  the  omission,  in  the  certificate  183. 

tiled,  of  the  day  of  the  mouth  (the         '  See  Angell  and  Ames,  Corp..  £ 

latter  being  given),  upon  which  the  30.).  *  bee  Ib.,  §  307.  s  Sc<  Ih. 
art  ides  of  association  wcn-ackmnvl-  «  See  Ib.  •  See  Ib.,  g  308. 

1-dsrcd,    was    held   :i    sufficient    ac-         *  See  Ib.        *  See  Ib.       8  See  Ib. 


266  THE  LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

is  understood  by  the  parties  to  be  the  mode  in  which  the  par- 
ticular business  would  or  might  be  done.1  But  where  three 
persons  are  appointed  by  the  association  for  a  particular  pur- 
pose, all  must  act,  and  a  contract  made  by  two  of  the  three 
will  not  bind  the  corporation.*  It  seems,  however,  that  where 
an  office  has  been  tilled  by  the  appointment  of  two  persons  to 
act  jointly  in  the  execution  of  its  duties,'  where  the  functions 
are  ministerial  only,  on  the  death  of  one  of  the  two,  the  office 
will  survive  to  the  remaining  incumbent,  and  its  duties  be 
properly  executed  by  him.4 

Society's  Liability  for  Torts  and  Misrepresentations  of  Agents. 

§  252.  The  commission  of  a  tort  by  one  of  its  agents  or 
servants,  ratified  by  the  corporation,  by  the  knowledge  and 
consent  of  its  managing  officers  (which  must,  in  general,  be 
proved),  will  render  it  liable  to  trespass  equally  as  if  it  had 
previously  authorized  the  same.5  And  where  a  corporation 
places,  or  allows  a  person  to  remain  in  a  position  implying 
responsibility,  thereby  inducing  others  to  confide  in  his  in- 
tegrity, especially  concerning  matters  which  properly  pertain 
to  the  office  or  agency,  and  siipposed  to  be  peculiarly  within 

'See  Field,   Corp.,     §  204;  cit.  has  power  to  appoint  any  officer  (it 

Coles  v.  Trecoothick,  9  Ves.,  234  et  is  said  iu  Davis,  Law  of  Building, 

seq.;  1  Bill's  Com.    387  et  seq.;  3  etc.,  Societies,  p.  91,  cit.  Sharpe  v. 

Chit,  on  Cora,  and  Man.  206;  Ship-  Warren,  6  Price,  131),  the  appoint- 

ley  v.   Kymer,   1   M.  and  S.  484;  ment  of  two  persons  to  act  jointly 

Cockran  v.  Islam,  2  M.  and  S.  301 ;  in  the  execution  of  the  office  will  be 

Laussatt  v.  Lippincott,  6  S.  and  R.  valid. 

386;  Johnson  v.  Cunningham,  1  4  See  Reg.  v.  "Wade,  4  Jur,  N.  S. 
Ala.  (X.  S.)249.  The  action  of  the  68;  8  E.  and  B.  384.  But  where 
society's  solicitor  allowing  the  ap-  some  portion,  at  least,  of  the  duties 
plicant  for  the  loan  to  procure  the  of  the  office  are  judicial,  it  will  not 
search  of  the  records,  who  then  in-  survive.  See  also  the  Auditor  Cur- 
duced  the  clerk  to  omit  a  certain  le's  Case.  11  Co.  36. 
previous  mortgage  upon  the  prop-  *  See  Angell  and  Ames,  Corp..  £ 
<-rty  in  his  certificate,  does  not  make  304.  But  the  mere  presence  of  the 
said  applicant  the  society's  agent,  so  society's  solicitor,  at  the  hearing  be- 
as  to  relieve  the  recorder  from  lia-  fore  a  magistrate,  to  conduct  the 
bility  upon  the  search.  Peabody  proceedings  in  behalf  of  the  servant 
Building  and  Loan  Association  v.  when  arrested,  or  the  writing  of  a  let- 
Houseman,  89  Pa.  St.  261.  ter  by  the  secretary  of  the  company, 

*  Corn   Exch.   Bank  v.   Cumber-  for  the  purpose  of  effecting  a  corn- 
laud  Coal  Co.,  1  Bosw.  436.  promise,  is  no  evidence  of  a  rati- 

8  And  if  by  the  rules  the  society  fication. 


§  252.]  GENERAL   POWERS   OF   BUILDING    ASSOCIATIONS.         267 

the  knowledge  of  the  officer  or  agent,  his  misrepresentation,, 
negligence,  or  fraud  will  affect  the  association  with  liability 
to  a  party,  who,  having  dealt  with  him  in  good  faith,  has  sus- 
tained loss  in  consequence.'  For,  where  one  of  two  innocent 
parties  must  suffer  by  the  acts  of  a  third  party,  he  who  ena- 
bled the  latter  to  occasion  the  injury  must  carry  the  damages 
caused  thereby."  Thus,  a  feme  sole  held  stock  in  a  building 
association,  in  the  name  of  a  trustee,  paying  the  monthly  dues 
by  an  agent,  who,  meanwhile,  borrowed  money  from  the 
building  association  to  the  full  value  of  the  stock,  gave  a 
mortgage  therefor,  and  at  length  had  this  mortgage  satisfied 
by  giving  up  the  stock,  though  it  still  stood,  untransf erred, 
in  the  name  of  the  trustee.  A  bill  in  equity  was  filed  to  se- 
cure the  value  of  the  stock  to  the  trustee  and  cestui  que  trust. 
It  was  held  that  the  complainant  was  not  estopped  by  the 
silence  of  the  trustee,  when  the  agent's  name,  instead  of  his, 
was  called  to  answer  for  monthly  dues ;  for  an  estoppel  pro- 
tects one  misled  by  silence,  where  silence  is  a  fraud.  The 
association  could  not  have  been  misled,  wrhile  the  shares  stood 
upon  the  books  untransf  erred,  in  the  name  of  the  trustee  and 
cestui  que  trust.  The  building  association  was,  therefore, 
held  liable  to  refund  to  them  the  value  of  the  stock.'  Meas- 
uring, then,  the  agent's  authority  by  the  extent  of  his  em- 
ployment, his  principal  is  liable  to  third  parties  in  a  civil  suit 
for  the  frauds,  deceits,  concealments,  misrepresentations,  torts, 
negligences,  and  omissions  of  duty  of  the  agent,  in  the  course 
of  his  employment,  and,  if  authorized  by  the  principal,  both 
he  and  the  agent  are  liable.4  But  representations,  false  in 
fact,  if  innocently  made  by  a  party,  believing  in  the  truth  of 
what  he  asserts,  will  afford  no  ground  of  action  ;  the  concur- 
rence of  fraudulent  intent  and  false  representation,  and  dam- 
age resulting  therefrom,  constitute  the  ground  of  it,6  and 

1  Field,  Corp.,  §  193.  North  River  Bank  v.  Aymnr,  3  Hill, 

s  Story,  Agency,  §  127;  see  also  262;  Commercial  Bank  v.  Kortrisrht. 

Story,  Eq.  Jur.,  §§  884-394;  Fitz-  22  Wend.  248;  Locke  0.  Steams.  1 

herbert  v.  Mather,  1  T.  R.  12;  Field,  Mete.  560. 

Corp.,  §  193;  cit.,  inter  alia,  Neville         3  Larkins's  App.,  38  Pa.  St.  457. 
v.  Wilkinson,  1  Bro.  Cli.  548;  3  P.         *  Lamm    v.    The    Port     Deposit 

Wins.  74;  Scott  v.  Scott,  1  Cox,  378;  Home-stead    Association    of    Cecil 

Bicknell.  6  Vcs.  173;  Pear-  County.  49  Md.  233. 
Morgan,    2  Bro.    Ch.   388;         *  Ib.  and  B<  nj.  on  Sales,  338. 


208  THE   LAW   OF   BUILDING    ASSOCIATIONS.  [CH.   X. 

where  it  is  laid,  the  rule  caveat  einptor,  applying  to  sales 
made  by  trustees  (<?.^.,  under  a  power  to  sell  given  in  a  mort- 
gage), does  not  shield  a  j>arty  rendering  himself  liable  to  an 
action  for  fraud  and  deceit  perpetrated  at  a  sale  thus  made.1 

Agents'  Liability  for  Interest  on  Moneys  Collected. 

§  253.  Agents  entrusted  with  the  collection  or  safe-keep- 
ing of  corporate  moneys,  are  chargeable  with  interest  thereon, 
if  they  unreasonably  neglect  to  inform  the  association  of  the 
receipt  of  the  money,  and  the  interest  then  accrues  from  the 
time  when  such  information  should  have  been  communi- 
cated ; s  or,  if  they  use  the  funds,  or  default  in  accounting 
for  them,'  or  fraudulently  obtain  and  withhold  them.4 

Right  and  Liability  to  Suits  and  Actions.     Employment  of  Attorneys. 
Forms,  etc.,  of  Proceedings. 

§  254.  The  obligations  arising  upon  any  contract  thus  en- 
tered into  by  the  building  association,  or  through  implication 
affecting  it  as  a  party,  either  as  investing  it  with  rights,  or  as 
loading  it  with  liabilities,  would  be  nugatory,  indeed,  if  they 
were  not  judicially  enf  orcable  by  or  against  it,  as  the  case  may 
be.  It  has  already  been  observed  that  the  rights  incident  to 
membership,  such  as  that  of  withdrawal,  of  insisting  upon 
legal  and  conscientious  behavior  on  the  part  of  the  officers, 
may  give  individual  members  a  standing  in  courts  of  justice 
as  plaintiffs  against  the  association  ; "  that  officers  who  are 
wrongfully  removed  may  sue  for  damages ; "  that  the  State 
may  call  it  to  an  account  for  a  violation  of  its  charter  com- 
pact;7 and  that  a  shareholder  may  demand  indemnification 
at  its  hands  for  refusing  to  acknowledge  his  status  as  such,  by 
transferring  to  his  name  the  stock  he  owns,  and  has  properly 
presented  for  that  purpose.8  The  building  association,  on  the 
other  hand,  has,  incidentally,  appeared  possessed  of  the  power 
of  bringing  suit  against  delinquent  officers '  and  members,10 

1  Lamm    v.    The    Port    Deposit        5  See  ante,  §g  136,  137,  145,  213. 
Homestead  Association,  supra.  *  See  ante,  §  229. 

*  See  Dodge  e.    Perkins,  9  Pick.         7  See  ante,  §  64;  and,  in  detail, 

368.  post.  §§  309,  325. 

3  Williams  r.  Storrs,  6  Johns.  Ch.         8  See  ante,  §  78;  and,  iu  detail, 
313;  and  see  Ellery  v.  Cunningham,  post,  §  268. 

1  Mete   112.  »  See  ante,  g£  209-210. 

4  Wood  «.  Bobbins.  11  Mass.  504.         10  See  ante,  g  96. 


§  257.]  GENERAL   POWERS   OF   BUILDING   ASSOCIATIONS.         269 

whether  borrowers  or  investors,  and  of  defending  actions 
brought  against  itself.1  To  these  liabilities  and  privileges 
of  the  association  must  be  added,  in  general,  those  of  enforc- 
ing every  legal  or  equitable  right  against  outsiders,  by  appeal- 
ing to  the  proper  judicial  tribunal,  and  of  suffering  suit  at 
the  hands  of  such,  wherever  they  may  have  acquired  a  claim 
upon  it. 

§  255.  The  employment  of  attorneys  is  a  necessary  inci- 
dent to  this  power  and  liability.  It  seems  to  be  held,  in  Eng- 
land, that  the  attorney's  appointment  should  be  made  under 
the  common  seal  of  the  association,  even  where  his  name  is 
mentioned  in  the  rules."  But  the  same  strictness  does  not 
now  obtain,  at  least,  in  the  majority  of  the  United  States.3 

§  256.  In  the  issuing  of  process  for  and  against  building 
associations,  and  in  every  successive  step  of  the  proceedings, 
the  laws  of  the  State  in  which  the  proceedings  are  taken,  rel- 
ative to  suits  and  executions  by  and  against  corporations,  as 
well  as  the  general  doctrine  and  rules  of  law  applicable  to 
that  subject,  are  to  be,  in  every  respect,  observed,  unless  varied 
or  suspended  by  positive  statutory  enactment.4 

Society  may  Sue   on   Obligations    Executed   to   it  by  Wrong  Name. 
Misnomer.     Abbreviations. 

§  257.  A  building  association,  being  the  holder  of  an  ob- 
ligation executed  to  it  by  a  name  differing  from  its  corporate 
name,  may  sue  in  its  right  name,  alleging  that  it  is  the  party 
intended.6  And  if,  being  plaintiff,  it  has  been  misnamed  in 
bringing  a  bill  in  equity,  the  defect  may  be  cured  by  amend- 
ment at  the  hearing.8  An  endorsement  upon  the  summons 

1  See  ante,  §§  137,  138,  etc.  Newport  Savings   Association,    11 

*  Davis,   Law  of  Building,  etc.,  Bush  (Ky.),  305. 
Societies,    p.    107;    cit.    Arnold    v.         s  Hoboken  Building  Association 

The  Mayor,  etc.,  of  Poole,  5  Scott,  c.  Martin,  2  Beas.  (N.  J.)  428.    Sec 

N.  R.  741;  2  D.,  N    S.   574;  4  M.  also  African  Society  v.  Varick,  13 

and  G.  860;  12  L.  J.,  C.  P.  97;  7  Johns.  (N.  Y.)  38;  Trustees  e.  Re- 

Jur.  653.     See  ante,  §  214.  note.  neau,  2Swau(Tenn.),94;Ft.  Wayne 

3  See  Angell  and  Ames,  Corp.,  §  v.  Jackson,  7  Blackf.  (Ind.)36.     In- 
284.  habitants  of  Upper  Alloways  Creek 

4  Thus,  in  Kentucky,  it,  like  any  v.  String,  5  Halst.  (N.  J.)  323;  An- 
corporation  instituting  an  action  in  gell  and  Ames,  Corp.,  g  647. 

any  of  the  courts,  must  give  bond  '  Hoboken  Buildinir  Association 
for  costs,  otherwise  the  action  will  r.  Martin,  supra;  and  references  in 
be  dismissed.  See  Shelly  ».  The  note  above. 


270  THE   LAW   OF    BUILDING    ASSOCIATIONS.  [CH.    X. 

served  on  a  building  association,  referring  to  the  within  writ. 
but  giving  merely  the  initials  of  the  society's  name  (as  "  O. 
F.  B.  A.,  "  meaning  "  Odd  Fellows'  Building  Association"), 
creates  an  ambiguity  which  is  removed  by  examining  the 
"  within  writ,"  where  the  name  appears  in  full.1 

Necessary  Averments  as  to  Default  in  Suits  Against  Borrowing  Mem- 
bers. 

§  258.  In  a  suit  by  a  building  association  upon  a  bond 
given  to  it,  containing  the  usual  special  conditions  and  pro- 
visos, that,  upon  the  failure  to  make  certain  payments  for  a 
certain  length  of  time,  the  whole  principal,  with  interest, 
lines,  etc.,  shall  become  at  once  recoverable;  the  ordinary 
averment,  that  the  sum  stipulated,  with  interest,  yet  remains 
unpaid,  is  inapplicable.  It  has  been  held  insufficient  in  Penn- 
sylvania to  ground  a  judgment  for  want  of  an  affidavit  of  de- 
fence. The  declaration  (or,  if  the  action  be  by  scire  facias 
upon  the  mortgage  securing  the  bond,  the  writ  which  takes 
its  place),  must  show,  upon  its  face,  an  immediate  cause  of 
action.  It  cannot  be  presumed  or  inferred,  without  specific 
allegation,  that  there  was  a  failure  to  pay  installments  beyond 
the  stipulated  period  of  grace ;  nor  that  the  principal  sum, 
etc.,  has  actually  become  recoverable.8  Upon  the  same  prin- 
ciple, in  New  York,  where  the  mortgage  gave  the  building 
association  a  power  to  sell,  if  default  be  made  "  in  the  said 
monthly  payments,  for  the  space  of  six  months,  after  they 
or  any  of  them  shall  become  due,"  and  the  building  associa- 
tion's complaint  averred  that  default  had  been  made  in 
monthly  and  other  payments,  and  that  a  certain  sum  was  due, 
but  not  that  any  one  monthly  payment  had  been  due  six 
months ;  a  demurrer  to  the  complaint  was  sustained.3  And 
in  Maryland  it  was  distinctly  asserted,  that,  where  the  contin- 
uance of  default  for  a  specified  time  is  a  condition  precedent 
to  the  sale  of  the  property  under  the  mortgage  and  decree,  the 
court,  unless  such  default  is  shown  to  exist,  will  interfere  to 
arrest  the  sale.4 

1  Odd  Fellows'  Building  Associa-  sociation  v.  Platt  et  al. ,  5  Duer  (N. 

tion  v.  Hogan,  28  Ark.  261.  Y.),  675. 

*  Swift  v.  The  Allegheny  Build-  4  Schaeffer  v.  The  Amicable  Per- 

ing  and  Loan  Ass'n,  82  Pa.,  St.  142.  manent  Land  and  Loan  Co.  of  Balti- 

8  Second  American  Building  As-  more  City,  47  M<1.  13*5. 


§  260.]  GENERAL  POWERS   OF   BUILDING   ASSOCIATIONS.         271 
Computation  of  Period  of  Default. 

§  259.  But  in  the  computation  of  the  period  fixed  by 
charter  or  by-laws  as  the  limit  allowed  before  the  whole  debt 
becomes  due,  partial  payments  of  dues,  etc.,  are  not  to  be 
counted.  The  period  begins  to  run  from  the  first  day  of  the 
month  next  following  the  last  month  of  which  the  dues,  etc., 
were  fully  paid.  Thus,  where  the  period  of  six  months  was 
fixed,  as  the  period  whose  elapse,  without  payment,  would 
give  the  association  the  right  to  proceed  upon  the  securities 
held  by  it  against  the  borrower,  to  enforce  performance  of 
his  duties  and  undertakings,  and  collect  the  debt,  it  was  held 
that  a  member  was  to  be  deemed  six  months  in  arrears,  notwith- 
standing a  partial  payment  of  dues  in  the  first  of  the  six 
months  counted ;  so  that,  where  part  of  January's  dues  had 
been  paid  and  judgment  and  execution  were  had  in  July,  this 
was  not  premature.1 

Certainty  Required  in  Defendant's  Allegations  of  Payment,  and  Proof. 
Agency. 

§  260.  Conversely,  the  defendant,  in  his  allegations  of 
payment,  is  held  to  certainty  and  particularity  in  his  state- 
ments and  proofs.  Thus,  in  an  affidavit  of  defence,  in  IV i in- 
sylvan  ia,  the  mere  allegation  of  payments  by  the  defending 
borrower  is  insufficient  to  prevent  judgment.  Such  pay- 
ments must  be  distinctly  alleged  to  have  been  made  on  the 
claim  in  suit.2  The  presumption  is  that  they  were  made  upon 
fines  and  dues.  And  it  is  the  duty  of  the  defending  mort- 
gagor to  prove  payment  of  the  mortgage  to  the  association. 
win-re  that  is  the  defence,  with  reasonable  certainty.  Ill- 
holds  the  affirmative,  and  the  proof  is  on  him."  So,  under  a 
plea  of  payment,  in  a  feigned  issue  to  determine  the  amount 
due  on  a  judgment  confessed  to  a  building  association  l>y  a 
borrowing  member,  the  burden  of  proof  of  the  matin 
the  stock  rests  upon  the  defendant.4  And  where  a  party, 
by  his  own  negligence,  has  deprived  himself  of  the  written 

1  Barndt   v.  Greul,  4    Leg.  Gaz.  Association   v.   Wall,    7    Phila. 

(Pa.)  388;  S.   C.,  1  Luz.  L.  Reg.  (Pa.)  240. 

737.  •»  \V;itkius  v.  The  Woi-kinim. 

*  Selden  v.  The  Reliable  Savings  Building  and  Loan  Association.  Hi 

and  Building  Association.  2  W.  N.  W.  N.   C.  (Pa.)  41-i;  38  Leg.   lut. 

C.  (Pa.)  481;  32  P.  F.  Smith,  336.  333;  97  Pa.  St.  514. 


272  THE   LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

evidence  of  payments  claimed  credit  for  by  him,  which  was 
by  entry  in  a  book  provided  by  the  building  association  for 
that  purpose  ;  he  must,  in  order  to  avail  himself  of  such  pay- 
ments, produce  convincing  proof  of  their  having  been  made. 
Uncertain,  vague,  and  indefinite  statements  will  not  suffice.1 
In  an  action  by  the  building  association  against  the  guarantor 
of  an  indebted  member's  bond,  a  defence,  based  upon  an 
alleged  agreement  with  its  agent,  to  the  effect,  that,  upon  the 
happening  of  a  certain  contingency,  the  surety  should  be  re- 
leased from  his  liability,  must,  in  order  to  be  available,  estab- 
lish, besides  the  fact  of  the  happening  of  the  contingency ; 
also  that  the  agreement  existed  within  the  knowledge  of  the 
officers  of  the  building  association,  or  that  the  agent  was  act- 
ing, at  the  time,  within  the  scope  of  his  authority,  or  that  his 
declarations  were  made  in  the  course  of  business  which  he 
was  authorized  to  transact.1 

Averment  of,  and  Pleas  to,  Incorporation. 

§  261.  It  was  held  in  Missouri,  that,  in  a  suit  by  an  asso- 
ciation, an  averment  by  it  that  it  was  a  corporation  "  duly  in- 
corporated under  and  by  virtue  of  an  act  of  General  Assembly 
of  the  State  of  Missouri,  entitled,"  etc.,  was  a  sufficient  alle- 
gation of  the  plaintiff's  corporate  existence.3  But  it  seema 
that,  in  general,  no  specific  allegation  of  incorporation  will  bo 
required,  either  where  the  building  association  is  plaintiff,  or 
where  it  is  defendant,  beyond  the  mere  statement  of  its  name, 
and  the  making  of  the  agreement  or  the  creating  of  the  lien  be 
tween  the  association  and  the  other  party.,  out  of  which  the 
suit  arises.  This  is  impliedly  averred  by  the  name  itself,* 

1  Clarkville  Building  and  Loan  Staps,  Hob.  211;  The  Dutch  West 

Association  v.  Stephens,  11  C.  E.  India  Co.  v.  Henriques,  2  Ld.  Ray. 

Gr.  (N.  J.)351.  1535;  The  President  of  the  U.  S. 

9  Gass  v.  Citizens'  Building  and  Bank  «.  Harkins,  1  Johns.  Cas.  132; 

Loan  Association,  9  W.  N.  C.  (Pa.)  The  Bennington  Iron  Co.  r.  Ruther- 

:WO.  ford,  3  Harr.  (N.  J.)  105:  Harris  v. 

3  Chillicote    Savings    Association  The  Muskingum  M.  Co.,  4  Blaokf. 
c.  Rueggeret  al.,60Mo.  218.  (Ind.)  267;  Richardson  T.  The  St. 

4  Stein   and  wife  v.  Indianapolis  Joseph's  Iron  Co..  5  Ih.  146;  Dut- 
Building,  Loan  Fund  and  Savings  flier's  Cotton  Manufacturing  Co.  n. 
Association.  18  Ind.  237;  Odd  Fel-  Davis.  14. Johns.  239;  Bank  of  Utica 
lows'  Building  Association  v.   Ho-  t>.  Smalley.  2  Cow.  770:  Kennedy 
gan,    28  Ark.   261;    cit.    Norris  n.  T.   Cotton.   28  Barb.    59;   Bank  of 


§  263.]  GENERAL  POWERS  OF  BUILDING   ASSOCIATIONS.         273 


and  no  proof  of  it  need  be  made  by  a  corporation  plaintiff  un- 
der a  plea  of  the  general  issue.  If  the  want  of  corporate  ex- 
istence is  relied  upon  as  a  defence,  it  must  be  raised  distinctly 
by  the  plea  of  nul  tiel  corporation,1  which  may  be  either  a 
plea  in  bar,  or  in  abatement.2 

§  262.  How  far  the  practical  dissolution  of  the  society 
before  the  intended  period  of  its  winding-Tip,  affects  existing 
contracts,  will  form  the  subject  of  discussion  later  on.*  But 
it  may  be  stated  here,  that,  where  the  fact  of  the  indebted- 
ness is  established,  a  very  clear  case  should  be  made  out  to 
enable  a  debtor  to  escape  liability,  on  the  ground  that  the 
building  association  has  ceased  to  exist.4 

§  263.  A  tender  of  the  amount  actually  due  the  associa- 
tion, or  of  such  terms  as  will  satisfy  its  just  demands,  and 


Michigan  v.  Williams,  5  Wend.  478; 
Bank  of  Waterville  v.  Bcltscr,  13 
llow.Pr.  270.  See  also  Fran tzv.  The 
Teutonia  Building  Association  No. 
2,  2-4  Md.  259;  where  there  was  an 
ex  purte  proceeding  by  the  society. 

'  See  Odd  Fellows'  Building  As- 
sociation v.  Hogan,  28  Ark.  261; 
Phenix  Bank  of  N.  Y.  v.  Curtis,  14 
Conn.  437;  Champliu  v.  Tilley,  3 
Day,  303;  Sutton  v.  Cole,  3  Pick. 
232,  245;  Penobscot  Boom  Corpo- 
ration v.  Lamsou,  16  Maine,  224; 
Bank  of  Manchester  v.  Allen,  11 
Verm.  302;  Boston  Type  Foundry 
9.  Spooner,  5  Vt.  93;  Lord  v.  Bige- 
lo\v,  8  Vt.  445;  ^Etna  Insurance  Co. 
v.  Wires,  28  Vt.  93;  School  District 
P,  niais.lell,  6  N.  Ilamp.  197;  Bank 
of  Utiea  «.  Smalley,  2  Cow.  (N.  Y.) 
770;  Lehigh  Bridge  Co.  v.  Lehigh 
Coal  and  Navigation  Co.,  4  Rawle, 
(Pa.)  9;  Zion  Church  r.  St.  Peter's 
Church,  5  Watts  and  Serg.  (Pa.) 
i!5:  Frit/  v.  Commissioners  of 
Montgomery,  17  Pa.  St.  130;  CInrk 
r.  Turnpike  Co..  13  Leg.  Int.  (Pa.) 
1"i(5:  Hliccm  r.  Naugatuck  Wheel 
Co.,  33  Pa.  St.  358. 

*  "  A  plea  in  bar  impugns  the  right 
of  notion  altogether;  a  plea  in  abate, 
iii«'nt.  only  the  form  or  names  in 


which  it  was  brought.  Stephen  on 
Plead.  432.  Hence  the  misnomer  of 
a  corporation,  as  well  as  of  a  natural 
person,  must  be  pleaded  in  abate- 
ment. But  the  defence  that  there 
never  was  such  a  natural  person  as 
the  plaintiff,  in  rerum  nature,  or 
that  such  a  corporation  as  that 
named  as  plaintiffs  never  existed, 
which  are  pleas  of  precisely  the  same- 
nature,  go  to  the  right  of  action  al- 
together, and  are  therefore  pleadable 
in  bar.  .  .  .  One  reason  is,  that,  in 
the  latter  case,  the  defendant  can- 
not give  the  plaintiffs  a  better  writ, 
which  must  generally  be  done  in 
abatement,  though  perhaps  not  al- 
ways." Sharswood,  J. ,  in  Northum- 
berland County  Bank  v.  Ever,  60 
Pa.  St.  436  (439),  where  the  question 
is  thoroughly  discussed.  The  dis- 
tinction seems  to  be;  that  where  the 
plea  is  substantially  that  of  misno- 
mer, it  is  in  abatement;  when  it  goes 
to  the  existence  of  the  corporation, 
at  the  time  of  the  impel  rat  ion  of  tin- 
writ,  or  at  any  time,  so  as  to  impugn 
the  right  of  suing  at  all.  it  is  in 
bar. 

»  See  post,  55  §  496-503. 

4  IIoliok«  n  Biiildiivj-  Association 
r.  Martin.  J  IVa  'X  J.)  428 


THE  LAW  OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

make  a  suit  unnecessary,  made  before  suit  brought,  or,  with 
accrued  costs,  after  its  commencement,  will,  besides  stopping 
the  running  of  interest  until  the  tender  is  accepted,  make 
the  building  association,  refusing  it,  liable  to  costs  of  suit, 
although  remaining  entitled  to  a  decree.1  Nor  does  the 
bringing  of  suit  against  a  member  relieve  him  of  the  nr<-r>- 
sity  of  continuing  his  stipulated  payments  and  interest,  or 
suspend  his  liability  to  fines  for  delinquency  in  his  regular 
payments.* 

Suits  by  Members  Against  Society.    Withdrawal,  Balances,  Promised 
Loan,  Refusal  to  Transfer  Shares. 

§  26-i.  It  has  already  been  said  that  the  exercise  of  the 
privilege  of  withdrawal,  under  the  statutes  of  the  several 
States  and  the  rules  of  the  building  associations,  gives  to  the 
member  availing  himself  of  it  the  right  to  enforce  his  claim 
upon  the  society  by  suit  at  law.3  But  where  he  assumes  to 
exercise  this  right,  it  must  appear  in  his  complaint  that  1  it- 
has  conformed  with  the  requirements  of  statute  and  by-laws 
relating  to  the  method  and  manner  and  notice  of  with- 
drawal, so  far  as,  being  contained  in  the  by-laws,  they  are 
legal  and  binding ; 4  and  that  the  society  has  refused  or 
neglected  to  satisfy  him  according  to  his  rights.  This  being 
made  out,  his  right  to  a  judgment  is  established,  although  its 
execution  may,  at  the  discretion  of  the  court,  upon  a  proper 
case,  be  deferred.5  Nor  can  any  losses  accruing  subsequently 
to  the  time,  when,  under  the  statute  or  by-laws,  the  with- 
drawal took  effect,  be  used  to  create  a  set-off  against  his 
-claim  by  holding  him  liable  to  contribution  thereto ; '  nor  are 
his  rights  affected  by  any  new  rule  adopted  by  the  association 
.subsequently  to  the  giving  of  the  notice.7  But  the  mere 

1  Columbian    Building    Associa-  4  See  ante,  §  132. 

lion  of  East  Baltimore  No.   4  t>.  5  See  ante,  §§  136-138. 

Crumb,  42  Md.  192;  and  see  ante,  •  See  ante,  §§  108-109.     And  the 

§  178.  burden  of  showing  losses  affirma 

1  The  German  Fair  Hill  Building  lively,  in  order  to  charge  a  member 

Association  c.  Metzger,  3  W.  X.  C.  desiring  to  withdraw,  is  upon  the 

(Pa.)  204;  Union  Building  Loan  As-  building      association.        National 

sociation  of  New  Brunswick  v.  The  Building  Association?.  Hottenstein. 

Masonic   Hall   Association,  etc.,    2  10  Pittsb.  Leg.  Jour.,  N.    S.   (Pa.) 

Stewart  (N.  JA  389.  22.',. 

1  See  ante.  £§  136-137  •  Annitage  c.  Walker,  2  Jur.,  N. 


§  265.]  GENEBAL   POWERS   OF  BUILDING   ASSOCIATIONS.         275 

acknowledgment  of  the  receipt  of  such  notice,  coupled  with 
a  statement  that  the  shares  "  will  be  paid  in  regular  order  of 
notice,"  and  signed  by  the  secretary  of  the  building  associa- 
tion, is  not  such  an  instrument  in  writing  for  the  payment 
of  money,  as  will  require  the  building  association  in  Pennsyl- 
vania to  file  an  affidavit  of  defence,  or,  upon  its  omission  to 
do  so,  suffer  judgment  immediately.  In  a  case  in  point,  the 
writing  was  as  follows:  "Philadelphia,  March  10,  1880. 
Mr.  James  W.  M.  Newlin : — Mr.  James  K.  Duffy  has  this 
day  transferred  to  your  name  four  shares  of  the  capital  stock 
of  the  Milton  Building  Association,  No.  2,  in  the  first  series, 
the  value  of  which  is  seven  hundred  and  eight  dollars  ($708). 
Notice  of  withdrawal  has  been  given  on  these  shares,  and 
they  will  be  paid  in  regular  order  of  notice.  M.  A.  Quinn, 
Secretary."  This  instrument  was  held  to  be  in  the  nature  of 
proof  that  there  was  a  certificate  to  which  N.  was  entitled, 
and  amounting  to  an  appropriation,  in  advance,  of  funds  of 
the  society  to  his  claim  to  be  disposed  of  in  regular  order  of 
notice  ;  but  not  as  forming  a  proper  basis  for  a  judgment,  for 
want  of  an  affidavit  of  defence.1 

§  265.  It  is  no  longer  a  doubtful  question  whether  or  not 
a  member  of  a  corporation,  standing  to  it  in  the  relation  of  a 
creditor  merely,  having  a  present  and  perfected  demand 
against  it,  may  become  the  plaintiff  in  a  suit  against  the  cor- 
poration to  enforce  the  claim.*  This  does  not  extend  to 
allowing  a  member  of  a  building  association,  qua  share- 
holder, to  sue  the  society  for  the  value  of  his  paid-up  stock 
before  the  winding  up  of  the  society  or  the  series  to  which 
he  belongs.  The  value  of  the  stock,  as  has  been  seen,  is  not 
a  present  subsisting  claim  against  the  building  association  in 
any  one  of  its  members  before  final  settlement,  but  depends 

S.  13;  S.  C.,  20  J.  P.  53:  26  L.  T.  voucher  in  the  hands  of  the  treas- 

Rep.  182;  2  Kay  and  J.  211.  urer.     Ashland  Banking  Co.  t.  Cen- 

!  Xcwlin  r.  The  Milton  Building  tralia  Mutual    Saving   Fund  Asso- 

and  Loan  Association  No.  2,  9  W.  ciation,   9  Luz.    Leg.    Reg.    (Pa.) 

N.  C.  (Pa.)  220.     Nor  is  an  order  41. 

drawn  by  the  president  upon  the  *  Angell  and  Ames,  Corp..  £  394; 

.rer  a  bill  of  exchange,  or  pos-  Hennighauscn  and  Wolff,  Rec'rs,  t. 

sessed  of  the  quality  of  negotiabil-  Tisher.  50  Md.  583;  U.  S.  Building 

ity;  it  is  a  mere  evidence  of  indcbt-  and  Lou:                    >n  r.  Silverman, 

edness,   and,    after  payment,   is  a  85  Pa.  St.  394.  audaute.  £;  144-145. 


276  THE  LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  X. 

upon  his  going  through  the  whole  course,  and  can  be  ascer- 
tained only  upon  actual  winding-up.1  But  remembering  that 
reference  is  here  had  only  to  definite  and  complete  rights, 
arising  out  of  contract  relations  between  the  member  and  the 
society,  independently  of  those  of  membership  merely,  a 
member  of  a  building  association  is  just  as  free  to  sue  the 
corporation  to  which  he  belongs,  in  order  to  enforce  such 
rights,  as  any  stranger  in  a  similar  position. 

§  266.  The  assignment  to  a  member  of  a  withdrawn  mem- 
ber's unpaid  balances  makes  him  a  creditor.  Where  a  member 
has,  in  the  proper  manner,  signified  his  intention  to  with- 
draw, and  his  rights  as  a  withdrawing  member  have  become 
completed  against  the  association,  he  is,  before  payment  of 
his  claim,  to  be  regarded  simply  as  a  creditor  of  the  building 
association.  If  he  transfers  his  ascertained  balance  in  its 
hands  to  a  continuing  member  of  the  association,  the  latter  is- 
in  the  position  of  one  who  holds  a  claim  against  the  same, 
which  is  entirely  distinct  from  his  own  rights  as  a  member, 
and  which  he  may  enforce  against  the  society.  It  has,  there- 
fore, been  held,  that  where  a  member  becomes,  by  assign- 
ment, the  holder  of  claims  of  balances  due  other  members 
who  have  withdrawn,  but  whose  lawful  demands  have  not 
yet  been  paid  by  the  building  association,  his  claim,  upon 
which  he  has  a  perfect  right  to  sue  the  association,  is  not,  in 
such  case,  liable  to  set-off  or  reduction  by  the  building  asso- 
ciation on  account  of  losses  sustained  since  the  ascertainment 
of  those  balances.  As  a  shareholder,  every  member  is  liable 
for  his  proportion  of  the  common  losses ;  but  as  a  creditor, 
he  is  entitled  to  recover  the  amount  due  him  independently 
of  all  losses.  If  there  are  acknowledged  and  ascertained 

1  O'Rourke  v.  West  Penns}rlvania  distribution.    Britton  v.  The  Ameri- 

Loau  and  Building  Association,  8  can  Building  and  Loan  Association. 

W.  N.  C.  (Pa.)  176;  93  Pa.  St.  308.  ISPhila.  430;  35  Leg.  Int.  (Pa.)  474. 

Nor,  in  Pennsylvania,  can  a  mem-  Nor  does  the  report  of  auditors  lix- 

ber  obtain  judgment  against  the  so-  ing  the  value  of  the  shares  entitle 

eiety,  for  want  of  an  affidavit  of  de-  a  withdrawing  member  to  a  judg- 

fence,  for  the  value  of  his  shares,  ment  for  that  amount,  for  want  of 

merely  upon  the  strength  of  the  re-  an  affidavit  of  defence,  the  value  of 

port  of  auditors  that  the  shares  \vcre  the  shares  being  liable  to  a  deduc- 

at  par,  and  before  a  meeting  has  tion.     Love  v.  Building  and  Loan 

been  convened  to  wind  up  and  make  Association,  11  W.  N.  C.  (Pa.)  303. 


§  268.]  GENERAL   POWERS  OF   BUILDING   ASSOCIATIONS.         277 

balances  standing  in  favor  of  any  persons  who  were  members 
and  had  withdrawn,  they  must  be  presumed  to  have  been 
arrived  at  after  allowing  all  deductions  to  which  the  with- 
drawing members,  the  assignors,  were  then  subject  or  liable, 
and  as  such,  the  claim  passes  in  its  integrity  to  the  assignee, 
to  be  enforced  by  him,  or  set-off  against  a  claim  which  the 
association  may  have  upon  him.1 

§  267.  Where  there  has  been  a  promise  by  a  building 
association  to  loan  a  certain  sum  of  money  to  a  member,  he 
cannot,  in  case  of  subsequent  refusal  of  the  company,  maintain 
an  action  of  assumpsit  to  recover  the  sum  thus  promised  from 
it.*  "  The  judgment  could  only  be  for  a  sum  of  money  certain, 
and  would  finally  settle  and  determine  that  that  amount 
belonged  to  the  plaintiff.  It  would  be  conclusive  upon  the 
parties ;  and  would,  as  a  necessary  consequence,  estop  the 
defendant  from  afterwards  claiming  that  the  money  so 
recovered  was  loaned  to  the  plaintiff."  The  remedy,  in 
such  case,  might  be  an  action  on  the  case  for  breach  of  con- 
tract.3 

§  268.  The  case  of  a  plaintiff  suing  a  building  association 
for  damages  upon  an  unjust  refusal  to  allow  a  transfer  on  its 
books  of  shares  acquired  by  him,  the  transfer  of  which 
was  duly  requested  of  the  society's  officers,  presents  no 
features  different  from  those  characterizing  similar  actions 
against  other  corporations.  The  right  to  sue  the  association 
in  such  case  is  undoubted,4  and  the  measure  of  damages  is 
the  same,  mutatis  mutandis,  as  in  other  corporations,  viz. : 
the  value  of  the  stock  at  the  time  of  refusal,  which  is 
to  be  ascertained  by  getting  the  amount  paid  thereon  as 
dues,  and  adding  interest  from  the  time  of  the  several  pav- 
ments.6 

1  Hennighausen      and      Wolff,  sufBciec.',security,and  rejected,  upon 

Receivers,  etc.,  v.  Tisher,  50  Md.  record.     Sec  ante,  §  124.           *  Ib. 

583.  4  German    Union    Building   and 

s  Conway  «.  The  Log  Cabin  Per-  Savings  Fund  Association  r.  Send  - 

inanent    Building    Association    of  mayer,  50  Pa.  St.   67;  State,    Gal- 

Bultimore  City,  52  Md.  137.     Even  Imiitli,  pros.,  v.  People's  Building 

although  the  society's  attorney  had,  and  Loan  Association  of  Camden, 

without  its  knowledge  or  consent,  14  Vr.  (N.  J.)  889. 

phiccd  the  mortgage  offered  by  the  6  Ib.    and  North  America  Build 

applicant,  nnd  which  was  deemed  in-  ing  Association  v.  Sutton,  35  Pa.  St 


278  THE   LAW  OF  BUILDING  ASSOCIATIONS.          [CH.  X, 

Society  Must  be  Party  to  Bill  in  Certain  Causes. 

§  269.  Where  the  deeds  of  conveyance  of  real  estate  con- 
veyed by  the  trustees  of  a  building  association  contained 
certain  restrictive  covenants  agreed  to  in  the  conveyances  by 
the  grantees,  one  covenant,  in  particular,  being  to  the  effect 
that  the  restrictive  covenants  should  not  only  inure  to  the 
benefit  of  the  persons  for  the  time  being  entitled  under  the 
conveyances  to  be  thereafter  made  by  the  covenantees,  but 
that  the  covenantees  should  be  deemed  to  be  trustees  of  the 
covenants  for  the  benefit  of  the  persons  for  the  time  being 
claiming  under  any  conveyances  already  made  by  the  trustees 
of  the  society ;  it  was  held  that  the  trustees  were  necessary 
parties  to  a  bill  brought  to  enforce  the  performance  of  the 
restrictive  covenants, — the  bill  being  filed  by  the  purchaser 
of  a  grantee  against  another  person  standing,  in  respect  of 
the  society,  in  a  similar  position  as  himself.1  And  in  an 
equitable  proceeding  by  a  member  against  misbehaving  offi- 
cers of  the  building  association,  it  has  been  seen,  the  latter 
must  be  made  a  party  defendant.8 

Judgment    Obtained    After   Dissolution  in  Action  Pending   Against 
Society. 

§  270.  A  judgment  rendered  in  an  action  against  a  cor- 
poration, which  has,  pending  such  action,  become  dissolved 
by  expiration  of  its  charter,  is  void  unless  the  action  has  been 
continued  against  the  proper  parties.8 

Nature  and  Qualifications  of  Right  of  Ordaining  By-Laws. 

§  271.  The  power  of  ordaining  by-laws,  a  sort  of  private 
statutes  for  the  internal  government  of  the  association,  regu- 
lating details  impossible  to  foresee  and  provide  for  either  by 
general  statutes  or  by  original  charter,  is  incidental  to  the 
very  being  of  a  corporation,  being  annexed  to  it  tacitly  by 
law,  if  not  expressly  conferred  by  charter.4  And  clauses  in 

463.    See  also  Larkins's  App.,  38  Pa.  '  Eastwood  v.  Lever,  4  De  G.,  J. 

St. 457.  And  see  post,  §§448-449.  But  and  S.  114.             9  See  ante,  §  213. 

where  the  stock  has  a  readily  ascer-  3  Sturgis  v.  Drew  et  al.,  5  N.  Y. 

tainable  value  in  the  stock  market,  W.  Dig.  95,  but  see  post,  — ;    Dis- 

that  would  probably  be  the  measure,  solution,  Ch.  xviii. 

SeeBabcock  et  al.  r.  Middlesex  Sav-  4  See  Angell  and  Ames,  Corp.,  p§ 

ings  Bank  and  Building  Association,  325-368;  Field,  Corp.,  §§  294-313; 

28  Conn.  302.  and  case  in  next  note. 


§  272.]  GENERAL  POWERS   OF   BUILDING   ASSOCIATIONS.         279 

a  charter  granted  by  special  act  of  Legislature,  giving  "  the 
force  and  effect  of  legal  enactment"  to  the  "  constitution  and 
by-laws"  that  may  be  adopted  by  the  society,  confer  no 
greater  sanction  than  that  usually  given  in  charters  which 
contain  no  such  provisions.1  Ordinarily  this  power  resides 
in  the  corporate  meeting  of  the  stockholders,  to  be  exercised 
by  them  in  the  same  manner  in  which  the  charter  directs 
them  to  exercise  other  powers,  or  to  transact  general  busi- 
ness.11 It  is  only  by  express  charter  provision,  that  this  power 
can  be  delegated  to  particular  officers  or  bodies  of  members, 
e.  (/.,  the  Board  of  Directors.3  In  such  case,  and  wherever 
the  charter  prescribes  the  mode  in  which  by-laws  shall  be 
passed,  or  the  preliminaries  to  be  observed  in  order  to  make 
them  effectual  and  valid,  all  regulations  upon  the  subject 
must  be  strictly  followed.4  And  all  by-laws,  to  be  binding, 
must  be  in  conformity  (1)  with  existing  and  supreme  laws, 
i.e.,  with  the  constitution  of  the  United  States,  and  the  acts  of 
Congress  under  it ;  with  the  constitution  and  all  valid  laws  of 
the  State  of  which  the  society  is  a  corporation;  and  with  the 
common  law  as  there  accepted ;  (2)  with  the  charter,  its 
letter  and  its  spirit ;  (3)  with  reason  and  equity.  Where  these 
features  are  found,  and  the  by-law  has  been  properly  passed, 
every  member's  consent  is  conclusively  presumed  and  his 
submission  required.5 

By-Laws  Must  Conform  to  Constitution  and  Laws  of  Union  and  State. 

§  272,  The  Constitution  of  the  United  States,  and  the  laws 
enacted  by  Congress,  are  part  and  parcel  of  the  constitution 
and  laws  of  every  individual  State,  and  as  such  are,  so  far  as 
applicable,  equally  supreme  with  the  latter  over  the  corpora- 
tion formed  under  them.  A  by-law  which  contravenes  any 

1  Martin  t>.  Nashville  Building  rum  for  the  purpose  of  passinir  a 

Association  et  al.,  2  Cold.  (Tenn.)  by-law,  where  no  special  number  is 

418.  fixed.  But  the  co-operation  of  a 

1  As  to  rules  relating  to  corporate  person  not  intended  by  charter  to 

meetings,  see  ante,  Ch.  viii.,  |§182-  have  a  voice  will  invalidate  the 

187.  law. 

3  Of  "  immemorial  usage,"  which  5  See  Hagerman  et  al.  T.  The  Ohio 
may  also  authorize  such  delegation  Building  and  Savings  Association, 
in  some  cases,  there  can  be  no  ques-  25  Ohio  St.  186;  Angell  and  Am. •>. 
tion  in  building  associations.  Corp.,  §  499;  Field,  Corp..  ; 

4  A  majority  constitutes  a  quo-     ante,  §  83. 


280  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  X. 

provision  of  either  is  utterly  void ;  and  not  only  the  laws  in 
force  at  the  time  of  the  granting  of  the  charter  (of  which  the 
common  law  of  the  State  is  an  essential  part),  but  all  that 
may  be  subsequently  passed  are  to  be  taken  into  considera- 
tion.1 

By-Laws  Must  Conform  with  Charter  and  Purpose  of  Incorporation ; 
else  Void.     Instances. 

§  273.  It  is  the  legitimate  province  of  the  Legislature  to 
define  the  purposes  of  an  incorporation,  and  not  within  the 
power  of  the  corporation  itself  to  do  so.  All  by-laws  must 
conform  to  the  purposes  for  which  the  corporation  is  created, 
as  gathered  from  its  charter,  and  must  be  in  accordance  with 
the  intention  which  dictated  the  same ;  otherwise  they  are 
void."  The  will  of  the  Legislature  may  be  expressed  in 
granting  a  specific  charter  directly ;  or  it  may  be,  once  for  all, 
declared  by  a  general  statute  under  which  the  associations  de- 
siring the  privileges  of  building  associations  may  become  in- 
corporated. In  either  case,  the  spirit  of  the  enactment — the 
intention  of  the  Legislature  in  providing  for  this  particular 
species  of  corporations  a  particular  class  of  powers — governs 
the  conduct  of  the  association,  and  circumscribes  the  extent  of 
its  lawful  enterprises,  just  as  the  express  provisions  of  the 
enactment  become  an  essential  part  of  the  charter  itself.  It 
has,  indeed,  been  said,  in  Georgia,  that,  when  a  petition  to 
court  for  incorporation  under  a  general  act,  for  the  purpose 
of  obtaining  a  charter,  fails  to  set  forth  the  object  of  the  pro- 
posed corporation,  it  is  competent  for  the  court,  in  granting 
its  assent,  to  specify  the  objects,  and  to  prescribe  the  terms 
on  which  the  charter  is  granted.8 

§  274.  When  there  is  a  question,  whether,  in  point  of 
fact,  the  b}T-law  is  such  as  to  frustrate  the  legitimate  and  de- 
clared object  of  the  association  ;  then,  in  a  controversy  regard- 
ing its  enforcement,  the  jury  becomes  practically  the  ju<lgf 
of  its  legality  or  illegality.4  If  no  other  facts  appear  to  the 
jury,  by  the  proof,  going  to  show  the  object  of  such  an  asso- 
ciation, than  the  constitution  or  by-laws,  and  tlie  contract 

1  See  ante,  §|  52,  53,  59,  63-65.  and  Building  Association,   54  Ga. 

*  Martin    v.    Nashville    Building  474. 

Association  etal., 2  Cold.(Tenn.)  418.         4  Parker  v.  The  Fulton  Loan  and 

8  Redwine  v.  The  Gate  City  Loan  Building  Association,  46  Ga.  166. 


§  276.]  GENERAL   POWERS   OF   BUILDING   ASSOCIATIONS.         281 

made  in  accordance  therewith,  a  verdict  that  the  contract  is 
not  illegal,  is  not  only  supported,  but  required,  by  the  evi- 
dence.1 But  if  it  be  shown,  by  proof  satisfactory,  that  the 
practical  operation  of  the  by-law  is  such  as  to  defeat  that  de- 
clared object,  or  to  bring  about  a  result  not  lawful  under  the 
laws  of  the  State,  the  by-law  must  be  held  to  be  void,3  and 
contracts  made  with  those  who  deal  with  the  association  under 
the  illegal  by-law  cannot  be  enforced  by  the  courts.3 

§  275.  But  where  the  by-law  is,  upon  its  face,  clearly  .1 
violation  of  the  charter  and  of  the  statutes,  it  is  presump- 
tively void,  and  contracts  under  it  cannot  be  enforced.  Thus, 
where  the  act  directs  that  the  building  association  shall  put 
up  its  money  at  auction,  and  that  the  member  bidding  the 
highest  premium  shall  be  entitled  to  the  loan,  a  by-law  fixing 
a  minimum  premium,  under  which  no  bids  are  to  be  received, 
is  entirely  void ; 4  and  where  its  operation  has  compelled  a 
member  to  contract  for  a  higher  premium  than,  in  the  course 
of  free  and  legitimate  competition,  he  would  have  been 
obliged  to  bid,  the  excess  cannot  be  recovered  from  him. 
But  it  must  appear  that  he  was  prejudiced  by  the  operation 
of  the  illegal  by-law.5 

§  276.  In  like  manner,  where  the  charter  called  for  a  di- 
vision of  funds  whenever  the  shares  in  any  series  became 
worth  $200,  a  by-law  was  held  void  which  directed  that, 
whenever  the  value  of  the  certificates  of  any  series  was  equal 
to  $200  each,  and  there  were  not  funds  enough  in  the  treas- 
ury to  pay  non-borrowers,  then  one  half  of  the  entire  income 
should  be  set  aside  for  that  purpose  ;  and  whenever  there  were 
$200  in  the  treasury  it  should  be  put  up  for  sale,  the  holders 
in  the  series  only  being  allowed  to  bid,  and  the  money  should 

1  ib.  77  N.   C.  145;  see  also  Lord   and 

8  Martin  v.  The  Nashville  Build-  Robinson  v.  The  Essex   Building 

ing  Association,  2  Cold.  (Tenn.)418;  Association  No.  4,  37  Md.  320;  and 

Herbert  v.  Kenton  Building  and  Sav-  infra  passim. 

ings  Association  of  Covington,  11  *  Stiles's  App.,  9  W.  N.  C.  (Pa.) 

Bush  (Ky.)    290;  Gordon   o.   Win-  83;  State  v.  Greenville  Buildi 

Chester  Building  and  Accumulating  soriation.  29  Ohio  St.  92;  State  v. 

Fund  Association,  12  Id.  110.  The  Oberlin  Building  and  L" 

.Mills  et  al.  v.  Salisbury  Build-  sociation,  35  Ohio  St.  986 

in;:  and  Loan  Association,  75  N.  C.  *  Orangeville      Mutual      Saving 

292;  Latham  and  wife  ;-.  Washing-  Fund    ami     Loan     Association    » 

ton  Building  and  Loan  A.«8iM*iatfbft,  Ymini:.  9  \V.  N.  C.  (Pa.)  251. 


282  THE   LAW   OF   BUILDING    ASSOCIATIONS.          [CH.  X. 

be  paid  to  the  highest  bidder,  the  premium  being  first  de- 
ducted and  added  to  the  value  of  the  remaining  certificates.1 
To  this  same  category  of  illegal  by-laws  belong  all  such  as 
place  restraints  beyond  merely  formal  regulations  calculated 
to  secure  order,  certainty,  and  expedition,  and  in  no  way  in- 
terfering with  or  delaying  established  rights,  upon  the  with- 
drawal of  members,  where  that  right  is  given  by  statute  upon 
compliance  with  certain  requirements.1 

§  277.  Of  the  different  classes  of  by-laws  mentioned  in  An- 
gell  and  Ames,  on  Corporations,3  as  being  void  for  transcend- 
ing the  charter,  the  following  may  be  noticed :  "  By-laws  cre- 
ating a  new  office,  imposing  an  oath  of  office  where  none  is 
provided  by  the  constitution,  giving  a  vote  to  a  person,  or  a 
casting  vote  to  an  officer  who  is  not  entitled  to  it  by  the  char- 
ter, restricting  the  right  of  an  officer  to  vote  to  a  mere  casting 
vote  in  case  of  a  tie,"  altering  the  prescribed  method  of  elec- 
tion, or  imposing  new  or  additional  tests  or  qualifications  on 
members  or  voters,  and  changing  the  salaries  of  officers,  hav- 
ing their  salaries  already  fixed  in  the  charter,  or  by  special 
contract. 

By-Laws  must  be  Reasonable  and  Equitable. 

§  278.  Particularly  important  in  the  matter  of  fines  and 
forfeitures,  the  attributes  of  reasonableness  and  equity  are  to 
a  certain  degree  essential  to  the  validity  of  all  by-laws.  It  is 
true,  that  what  is  bad  as  a  by-law  as  against  common  right, 
may  be  good  as  a  contract ;  since  a  man  may  part  voluntarily 
with  a  common  right,  of  which  it  is  impolitic  and  unjust  to 
deprive  him  by  a  by-law  passed  without  his  assent,  or,  per- 
haps, knowledge.4  Whilst,  therefore,  a  by-law  may  be  void 
as  against  strangers  and  dissenting  members,  it  may  vet 
be  good  as  a  contract  between  the  association  and  those  of 
its  members  who  assented.  And  the  principle,  that  all  the 
corporators  are  presumed  to  assent  to  what  is  done  at  a  regu- 
lar meeting,  will  not  deprive  a  dissenting  member  of  his 
remedy.  Where  that  presumption  applies,  it  goes  hand  in 
hand  with  the  other  presumption,  that  the  corporation  will 

1  Rodgers  v.  South  Western  Mu-         9  See  ante,  §  132. 
tual  Saving  Fund  and  Building  As-         3  §  345. 
sociation,  7  W.  N.  C.  (Pa.)  95.  4  Angell  and  Ames,  Corp.,  §  343. 


§  279.]  GENERAL   POWERS   OF   BUILDING   ASSOCIATIONS.         283 

pass  only  legal  votes ;  and  where  this  latter  fails  in  point  of 
fact,  the  other  drops  also.1  "  So  far  as  a  member's  rights, 
duties,  and  obligations  as  a  corporator  are  concerned,  he  is 
bound  by  the  acts  of  the  majority ;  but  the  corporation  has, 
of  course,  no  right  by  by-law,  or  resolution,  without  his  con- 
sent, to  dispense  with  a  contract  in  which  he  is  one  party,  and 
the  corporation  another."  *  In  other  words,  a  corporation  has 
not  the  right  to  repeal  a  by-law  so  as  to  impair  rights  which 
have  been  given  and  become  vested  by  virtue  of  the  by-law ; 
although  the  power  to  alter,  amend,  or  repeal  its  by-laws,  is 
granted  by  charter.* 

By-Laws  cannot  have  Retroactive  Efficacy  as  against  Rights   under 
Subsisting  Contracts. 

§  279.  Nor  can  the  enactment  of  new  rules  add  anything 
to  the  contract  of  a  mortgagor  to  a  building  association,  in  the 
way  of  burdening  him  beyond  what  the  rules  and  covenants, 
in  force  at  the  time  when  be  became  a  borrower,  imposed 
upon  him.  By  the  covenants  contained  in  their  mortgages 
advanced  members  of  a  building  association  covenanted  to  pay 
to  the  association,  at  the  times  and  in  the  manner  prescribed 
by  its  rules  for  the  time  being,  the  sums  payable  periodically, 
by  way  of  subscription  or  otherwise,  in  respect  of  their  shares, 
until  the  shares  with  interest  on  the  amount  in  advance  should 
be  realized,  and  until  the  premium  and  interest  thereon 
should  be  paid,  and  that,  in  the  mean  time  (except  when  varied 
by  those  presents),  all  the  rules  for  the  time  being  of  the 
society  should,  in  respect  of  the  shares,  be  observed  by  the 
member.  The  proviso  for  redemption  took  effect  in  each 
case  "if  the  shares  and  premium  and  interest  thereon  re- 
spectively should  be  duly  realized  and  paid  according  to  the 
covenant."  New  rules  were  subsequently  passed,  one  of 
which  provided  that  advanced  members,  before  redeeming 
their  securities,  should  pay  an  additional  sum  as  a  contribu- 
tion towards  certain  losses  sustained  by  the  society,  and  an- 
other of  which  made  these  rules  retroactive.  It  was  held, 

1  Angell  and  Ames,  Corp.,  §  343;  s  Angell  and  Ames,  Corp.,  £  :M,\ 

cit.  Stetson  v.  Kempton.  13  Mass.  "Kent  v.  Quicksilver  MiningCo., 

282;  Insurance   Co.   v.  Conuor,  17  78  N.  Y.  159.    See  ante,  §§  169- 

P;\.  St.  R  136.  170. 


284  THE   LAW   OF   BUILDING    ASSOCIATIONS.  [CH.  X. 

however,  that,  notwithstanding  the  reference  in  their  cove- 
nants to  the  "rules  for  the  time  being,"  previously  advanced 
mrmln'rs  were  entitled  to  redeem  their  securities  on  payment 
only  ot'  those  sums  which  they  were  liable  to  pay  according 
to  the  rules  in  existence  at  the  date  of  their  respective  con- 
tracts.1 

By-Laws  Manifestly  Contrary  to  Interest  of  Society,  etc.,  Void. 

§  280.  By-laws  which  are  manifestly  contrary  to  the  in- 
terests of  the  association,*  and  all  "  nugatory  and  vexatious, 
mi(.'(|ual,  oppressive"  by-laws  are  void.8 

By-Laws  Restricting  Members  from  Pursuing  Legal  Remedies.    Arbi- 
tration. 

§  281.  As  a  general  thing,  "  by-laws  prohibiting  members 
from  pursuing  their  legal  remedies  beyond  the  jurisdiction  of 
the  corporation,  are  void ;  since  no  power  less  than  that  of 
the  Legislature  can  exclude  a  subject  or  citizen  from  his  right 
to  legal  redress." 4  Yet  the  desirable  results  to  be  attained  by 
providing  a  method  of  settling  disputes  between  the  building 
association  and  its  members,  without  the  intervention  of  the 
courts,  is  self-evident.  A  regular  system  of  arbitration  has, 
therefore,  been  devised  in  England,  and  made  applicable  to 
building  associations  by  statute,*  giving  the  arbitrators  the 
privilege,  at  the  request  of  either  member  or  association,  to 
state  a  case  for  the  opinion  of  the  court."  No  attempt  has 
been  made  in  this  country  to  introduce  such  a  system  gener- 
ally, although  individual  building  associations  have  at  times 
adopted  rales  providing  for  the  adjustment  of  certain  speci- 
fied differences  between  the  association  and  its  members  by 
reference.  If,  between  the  society  and  the  member,  these  be 
made  part  of  an  express  contract,  they  will  be  enforced. 
Thus,  in  Virginia,  a  borrower  covenanted,  that,  in  case  of  his  de- 
fault, and  the  sale  of  the  mortgaged  land,  or  if  the  association 
should  decide  to  dissolve  before  the  time  fixed  in  its  charter,  it 

1  In    re    Norwich    and    Norfolk  *  See  Gosling  t>.  Veley,  12  Q.  B. 

Provident  Building  Society,  Smith's  347. 

Case.  1  L.  R.,  Ch.  Div.  481;  45  L.  »  See  Angell  and  A-mes,  Corp..  § 

J..  Ch.    Div.    143;  24  W.   R.  103.  347. 

And  see  Archer  v.  Harrison,  7  De  4  II)..  £  341. 

G.,  AL.c.  and  G.  404;  3  Jur.,  N.  S.  5  37  ami  38  Viet.,  C-  42,  8  21- 

194.   .  •  37  and  38  Viet.,  C.  42.  §  36- 


§281.]      LEGALITY   AND  EFFECT  OF  CERTAIN   ACTS,    ^.TC.     285 

should  receive  from  the  borrower,  or  out  of  the  proceeds  of 
the  sale  of  the  mortgaged  premises,  in  the  first  case,  in  dis- 
charge of  his  obligation,  such  an  amount  as  might  be  deter- 
mined upon  by  referees  chosen  by  both  parties,  according  to 
the  rate  at  which  shares  might  be  redeeming  at  the  time  of 
such  sale  or  dissolution.  It  was  held  that  this  agreement  was 
not  unlawful,  that  the  parties  were  competent  to  make  it,  and 
that  it  must  be  enforced.1 


CHAPTEE  XL 

LEGALITY    AND    EFFECT    OF    CERTAIN    ACTS    AND    CONTRACTS    OF 
BUILDING    ASSOCIATIONS. 

§  282.  Meaning  of  the  term  "ultra  vires." 

§  283.  Criterion  of  legality  of  acts  of  building  associations. 

§  284.  Acts  merely  in  excess  of  power  may  be  made  good  as  against 

society.     Liability  of  agents  and  directors. 
§  285.  Acts  and  contracts  in  excess  of  power  merely,  and  in  defiance  of 

statutory  prohibition;   effect  of  either  upon  the  rights  and 

liabilities  of  either  party.     Estoppel. 

§  293.  Power  of  building  associations  to  borrow  money.   English  cases. 
§  300.  Mere  overdrawing  of  bunk  account  is  not  borrowing. 
§  801.  Rule  in  America  as  to  borrowing  powers. 
§  303.  Power  of  building  associations  to  acquire  and  hold  lands. 
§  305.  English    decisions  on  power    to  acquire  lands.     Liability  of 

directors  acting  ultra  vires. 

%  308.  American  rule  as  to  power  to  acquire  and  hold  lands. 
§  309.  Effect  upon  corporation  of  unlawful  departure  from  proper 

functions. 

g  310.  Misuse  of  the  power  of  lending  money. 
g  311.  Nature  of  security  to  be  lawfully  taken.     Sureties. 
§  313.  Loans  to  strangers  and  persons  not  sui  juris.    Mortgages  of 

married  women. 

§  319.  Loans  to  other  corporations. 
£  322.  Power  to  reserve  interest. 
?  :'>•>;}.  Power  to  compromise  with  members. 
£  324.  Declaring  dividends. 
S  325.  Liability  to  State  for  unlawful  departure  from  powers  granted. 

1  White  r.  Mechanics'  Building  Association.  22  Grattan  (Va.),  233. 


THE   LAW   OF   BT I  I.I  MM,    ASSOCIATIONS.         [CH.  XI. 

Meaning  of  the  Term  "  Ultra  Vires." 

§  282.  That  the  inaccuracy  of  the  term  ultra  vires,  ap- 
plied to  corporate  acts,  either  prohibited  by  law  and  invalid 
at  common  law,  or  merely  in  excess  of  the  powers  intended, 
by  the  act  of  incorporation  and  the  charter,  to  be  conferred 
upon  its  creature,  the  corporation,  frequently  does,  and,  in 
the  nature  of  the  case,  very  readily  may  lead  to  confusion, 
has  been  forcibly  pointed  out  in  a  recent  work  upon  corpora- 
tions.1 There  is,  however,  no  other  term  familiar  to  legal 
phraseology,  by  which  the  one  or  the  other  of  these  classes 
may  safely  be  indicated.  And  it  is  believed,  that  any  diffi- 
culty arising  from  this  lack  of  precision  will  be  obviated,  if 
the  ambiguity  of  the  term  ultra  vires  is  borne  in  mind.  In 
pointing  out  the  result,  in  either  case,  the  arrangement  and 
precedents  adduced  in  this  chapter  will  scarcely  admit  of  any 
remaining  doubts  upon  the  principles  applicable.  But  it 
must  be  remembered,  that,  with  the  infinite  diversity  subsist- 
ing between  the  statutes  of  the  several  States  touching  build- 
ing associations,  and  the  extent  and  limitations  of  their 
powers,  as  well  as  the  constitutional  restrictions,  which,  in  the 
one  State  or  the  other,  may  come  into  play,  it  is  impossible 
to  lay  down  any  precise  and  universal  rule  as  to  what  a  build- 
ing association  may  lawfully  do  or  engage  in.  The  consti- 
.  tution  and  laws  of  the  State  must  be  primarily  referred  to. 
All  that  can  be  here  attempted  is  to  indicate,  in  general 
propositions,  the  consequences  following  illegal  or  presump- 
tuous actions,  and  to  supply  the  material  upon  which  to 
found,  in  any  particular  case,  an  argument  from  the  analogy 
of  established  decisions. 

Criterion  of  Legality  of  Acts  of  Building  Associations. 

§  283.  In  treating  of  the  power  of  building  associations 
to  contract,  it  has  already  been  said  that  it  is  confined  to  such 
objects  as  are  fairly  within  the  scope  of  the  business  contem- 
plated by  their  charters  as  the  proper  and  legitimate  purpose 
of  their  creation,  or  necessary  in  order  to  its  effectual  accom- 
plishment." What  this  purpose  is,  has  already  been  shown.3 

1  See  Morawetz,  Priv.  Corp.,  Ch.         •  See  ante,  §  232. 
ii.  3  See  ante,  §§  7,  117-121. 


§  284.]      LEGALITY   AND   EFFECT  OF   CERTAIN   ACTS,  ETC.     287 

To  all  practical  intents,  it  may  be  said  to  be,  to  enable  a 
number  of  associates  to  combine  and  invest  their  savings,  to 
mutual  advantage,  so  that,  from  time  to  time,  any  individual 
among  them  may  receive  out  of  the  accumulation  of  the 
pittances  which  each  contributes  periodically,  a  sum  by  way 
of  loan,  wherewith  to  buy  or  build  a  house,  mortgaging  it  to 
the  association  as  security  for  the  money  borrowed,  and  ulti- 
mately making  it  absolutely  his  own  by  paying  off  the 
encumbrance  out  of  his  subscriptions.1  It  is  only  so  far  as 
they  serve  these  purposes,  and  are  confined  to  the  objects 
necessarily  involved  therein,  that  the  acts  of  building  associa- 
tions fall  properly  within  the  powers  granted.  As  soon  as 
they  transgress  these  limits,  they  are  ultra  vires? 

Acts  Merely  in  Excess  of  Powers  may  be  Made  Good  as  Against 
Society.     Liability  of  Agents  and  Directors. 

§  28-i.  The  acts  of  a  corporation,  not  per  se  illegal,  or 
malum  prohibitum,  but  ultra  vires,  affecting,  however,  only 
the  interests  of  the  stockholders,  may  be  made  good  (so  far  as 
the  society  is  concerned)  by  their  assent.3  On  the  other 
hand,  if  the  agents  or  officers  make  ultra  vires  contracts,  they 
may  be  personally  responsible  to  the  stockholders  for  dam- 
ages sustained  by  reason  of  such  contracts,4  and  probably  to 
third  parties,  concerned  in  the  contract,  upon  an  implied 
assumpsit  that  their  corporation  had  the  power  to  do  what 
they  had  assumed  to  do  in  its  name.6 

1  See  In  re  Kent  Benefit  Building  Q.  B.  145.  The  defendants,  direc- 

Society,  30  L.  J.,  Ch.  785;  8.  C.,  4  tors  of  a  building  association,  had 

L.  T.  Rep.,  N.  S.  610;  7  Jur.,  N.  received  deposits,  giving  n-cv;:-!- 

S.  1045;  1  Dr.  and  Sm.  417;  9  W.  therefor,  promising  to  repay,  with 

R.  686;  25  J.  P.  805;  opinion  of  interest,  upon  fourteen  days' notice-, 

Kindersley,  V.-C.  after  the  expiration  of  three  months. 

8  See  Green's  Brice's  Ultra  Vires,  As  the  society  had  no  power  to  bor- 

p.  54.  As  to  acts  ultra  vires  of  the  row  money,  the  plaintiff,  unable  to 

agent's  powers,  but  not  of  the  asso-  get  her  money  back  from  it,  MUM! 

ciat  ion's,  see  ante,  §  347.  the  defendants,  who,  upon  the  above 

3  Kent  v.  Quicksilver  Mining  Co.,  principle,  were  held  liau'.e  in  d.-un- 
78  N.  Y.  159.  ages  for  a  breach  of  implied  war- 

4  See  Field,  Corp.,  §266.  ranty  of  authority.     Nor  can  they 
6  Richardson  v.  Williamson,  Law     claim  contribution  from  the  mc-in- 

Rqx.  6  Q.  B.  276;  S.  C.,  40  L.  J.,     bers.     See  ante,  §£  209-210. 


288  THE  LAW  OF  BUILDING   ASSOCIATIONS.        [CH.  XI. 

Acts  and  Contracts  in  Excess  of  Powers  Merely,  and  in  Defiance  of 
Statutory,  etc.,  Prohibition.  Effect  of  Either  upon  the  Rights  and 
Liabilities  of  Either  Party.  Estoppel. 

§  285.  A  building  association's  acts  ultra  vires,  whilst 
they  always  constitute  a  species  of  misbehavior  on  its  part, 
which  may  render  it  liable  to  a  forfeiture  of  its  franchises,  do 
not  necessarily  absolve  either  it,  or  the  party  with  whom  it 
was  dealing,  from  obligations  thus  wrongfully  contracted,  or 
deprive  either  one  of  the  rights  which  would  spring  from 
them,  if  they  were  indeed  lawful.  The  plea  of  ultra  vires 
imports,  not  that  the  corporation  could  not,  and  did  not,  in 
fact,  make  the  unauthorized  contract ;  but  that  it  ought  not 
to  have  been  made.1  Such  a  plea  either  of  the  parties  may 
be  estopped  from  setting  up.  An  unauthorized  act  of  a  build- 
ing association  may  be  one  which  is  simply  in  excess  of  its 
powers;  or  it  may  be  one  which  it  is  distinctly  indicated  by 
the  Legislature  that  it  shall  not,  under  any  circumstances,  be 
permitted  to  do. 

§  286.  In  the  former  case,  it  is  clear  that  the  individual 
contracting  with  the  society,  being  himself  under  no  disa- 
bility to  make  the  contract,  cannot  plead  the  impropriety  of 
the  society's  entering  into  it  as  an  excuse  for  the  non-per- 
formance of  the  obligations  resulting  from  it  to  him.  The 
s.«  >ciet y,  on  the  other  hand,  if  the  contract  be  still  executory, 
and  the  other  party's  rights  have  not  yet  become  perfected, 
nor  his  condition  so  changed  as  to  entitle  him,  in  justice,  to 
insist  upon  the  whole  performance,  may  plead  the  incompati- 
bility of  the  contract  with  its  legitimate  powers,  and  avoid  it 
upon  that  ground.  If,  however,  the  contract  has  become 
wholly,  or  in  part,  executed  by  the  individual  ;  if  the  associa- 
tion has  reaped  the  benefit  of  it,  and  the  other  party's  condi- 
tion has  become  so  changed  thereby  as  to  make  it  impractica- 
ble to  absolve  the  corporation  from  its  bargain,  without  injury 
to  him, — then  the  corporation  is  in  the  position  of  a  natural 
person  who  has  estopped  himself,  by  his  own  wrong,  from 
claiming  a  privilege  of  which  otherwise  he  might,  avail  him- 
self;  and  then,  as  in  the  case  of  an  individual,  so  in  the  case 
of  a  corporation,  the  abuse,  or  misuse,  of  a  power,  by  employ- 
ing it  for  an  end  or  purpose  for  which  it  ought  not  to  be  em- 

'  See  Bissell  t>.  The  M.  S.  and  N.  J.  R.  R.  Co..  22  N.  Y.  258. 


§  288.]       LEGALITY   AND    EFFECT   OF   CEKTAIX    ACTS,  ETC.     289 

ployed,  and  was  riot  given,  whilst  it  may  give  rise  to  a  liability 
to  the  public,  and  call  for  the  State's  interposition  to  enforce 
the  law  and  punish  the  delinquent,  cannot  operate  as  a  de- 
fence in  a  civil  action,  available  to  either  of  the  contracting 
parties.1 

§  287.  But  where  there  is  a  distinct  legislative  prohibition, 
the  wrongful  act  cannot  become  the  ground  of  any  legal 
right.  This  prohibition  need  not  be  express ;  it  is  enough  if 
there  is  no  doubt  left  of  the  intention  to  prohibit.  It  then 
amounts  to  a  legal  disability,  depriving  the  act  or  contract 
prohibited  of  any  existence  before  the  law,  and  preventing  it 
from  being  made  the  foundation  of  a  right  of  action  by  either 
party.8 

§  288.  Applying  these  principles  to  the  question,  whether 
or  not  a  person,  who  has  incurred  liabilities  towards  a  build- 
injj;  association,  may  set  up  its  illegal  acts,  not  distinctly  pro- 
hibited by  law,  as  a  defence  to  the  enforcement  of  the  con- 
tract, even  where  the  proof  of  its  existence  involves  the 
demonstration  of  its  impropriety,  it  is  clear  that  he  can  claim 
no  immunity  upon  such  showing.  Thus  it  constitutes  no  de- 
fence for  a  person  in  such  condition,  that  the  entire  amount 
of  the  capital  stock  provided  in  the  charter  had  not  been 
taken,  when  the  society  went  into  operation,  all  the  laws  for 
the  creation  and  organization  of  the  society  having  been  sub- 
stantially complied  with,  and  there  being  no  law  requiring  a 
building  association  to  have  more  capital  stock  than  the 
amount  actually  subscribed  for  and  taken  in  it.'  Nor  is  the 
fact  that  a  member  of  a  building  association,  sued  by  it,  was 
permitted  to  hold,  in  his  own  right,  a  number  of  shares 
greater  than  the  maximum  prescribed  by  the  by-laws  of  the 
corporation,  but  not  in  excess  of  the  number  limited  bv  the 
statute,  a  defence  for  him  or  his  guarantors,  against  anv  claim 
which  the  building  association  may  have  on  account  of  such 

1  Manufacturers  and  Mechanics'  site  which  the  society  may  waive, 
Saving  and  Loan  Co.  v.  Conover,  5  and  the  person,  who,  in  dealing  wiih 
Pliihi.  (Pa.)  18.  it,  sanctions  its  action,  cannot  after 

2  See  Ib.  and  Turner  v.  Calvert,  wards  set  it  up  as  a  defence.     See 
12  Scrg.  and  R.  (Pa.)  46.  Morrison  et  al ,  Rec'rs  Chesapeake 

Ma>soy  r.  The  Citizens'  Build-     Mutual  Land  and  Building  Associa- 
ini:    nnd    Savings    Association    of     tion,  v.  Dorsey,  48  Md.  461. 
Paola.  22  Kas.  624.     This  is  a  requi- 


290  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.   XT. 

shares,  whether  for  stated  dues,  interest,  or  fines.  The  build- 
ing association,  in  such  case,  may  waive  its  own  rule,  and  the 
violating  member,  or  his  surety,  cannot  complain  of  its  having 
done  so.1  Again,  it  is  no  answer,  in  a  suit  by  a  building  as- 
sociation upon  a  promissory  note,  that  the  plaintiff  exceeded 
its  powers  in  loaning  the  money  for  which  such  note  was 
given  to  one  not  a  member.  The  borrower  was  under  no 
disability  to  borrow  and  to  give  his  note  for  the  amount  of 
the  loan,  and  having  done  so,  he  cannot  be  permitted  to  deny 
the  right  of  the  association  to  receive  it."  And  if  the  lia- 
bility incurred  be  upon  securities  different  from  those  in 
which  the  charter  prescribes  that  the  corporation's  funds  shall 
be  invested,  the  borrower  cannot  claim  that  the  security  by 
him  given  is  void,  on  the  ground  that  the  corporation  had  no 
right  to  take  it.3 

§  289.  Equally  unavailing,  as  a  defence,  is  the  previous  or 
subsequent  illegal  conduct  of  the  building  association,  or  its 
officers,  where  a  valid  contract  has  been  entered  into,  or 
obligations  incurred.  A  case  occurred  in  England,  in  which 
a  building  association,  which  had  practically  converted  itself 
into  a  freehold  land-society  (partly  by  the  aid  of  borrowed 
money),  sought  to  enforce  payment  of  a  member's  stipulated 
subscription  after  and  in  consideration  of  his  acceptance  of  an 
allotment  of  land  thus  held  by  the  building  association  with- 
out legal  warrant.  The  claim  was  allowed  in  the  Queen's 
Bench,  the  defendant's  attempt,  to  set  up  the  illegal  action  of 
the  society  as  a  defence  to  his  liability,  being  overruled.  It 
was  said  by  Cockburn,  C.  J.,  that  "  such  a  misappropriation 
of  the  funds  may  be  prevented  by  an  application  to  a  court 
of  equity,  but  so  long  as  the  society  exists,  the  members  are 
bound  by  the  rules." 4  And  it  was  said  in  New  Jersey  that, 

1   Hagerman  et  al.  t.  The  Ohio  *  Mutual  Life  Insurance  Co.   v. 

Building  and  Savings  Association,  Wilcox,  7  N.  Y.  Weekly  Dig.  13. 

25  Ohio  St.  186.  4  Reg.  v.  D'Eyncourt,28  J.  P.  116; 

*  Poock  et  al.  v.  The  Lafayette  9  L.  T.  Rep.,  N.  S.  383;  4  Best  and 

Building  Association,  71  Ind.  357;  S.  820;  12  W.  R.  408;  S.  C.  nom. 

cit.  The  State  Board  of  Agriculture  Hughes  v.  Layton,  33  L.  J.,  M.  C. 

T.  The  Citizens'  Street  Railway  Co  ,  89;   10  Jur.,    N.    S.  513;    et  nom. 

47  Ind.  407;  National  Bank  v.  Mat-  Hughes  v.  D'Eyncourt,  3  X.  R.  420; 

thews,  8  Otto  (U.  8.),  621.    But  as  116^Engl.  C.  L.  Rep.  819. 
to  usury,   in  the  case  of  louus  to 
Strangers,  see  post,  §  313. 


§  291.]    LEGALITY    AX  I)    EFFECT   OF   CERTAIX   ACTS,    ETC.        291 

if  the  conduct  of  the  officers  of  the  building  association,  in 
changing  the  course  of  its  projected  business,  so  as  to  wind  it 
up  at  once,  the  investors  receiving  what  they  had  paid  in, 
with  interest,  the  borrowers  to  be  discharged  upon  repaying 
the  amount  they  had  actually  received,  with  interest,  was  ille- 
gal, it  still  did  not  operate  to  relieve  any  particular  borrower 
from  the  obligation  he  had  assumed  towards  the  society.1 

§  290.  On  the  other  hand,  it  has  already  been  seen,  that, 
where  the  building  association  has  adopted  an  arrangement 
for  the  repayment  of  loans  and  withdrawal  of  members,  not 
contemplated  by  the  charter,  and,  therefore,  supposed  to  be  of 
questionable  validity,  it  can  neither  be  rescinded  to  the  preju- 
dice of  a  member,  who,  acting  upon  it,  had  refrained  from 
paying  on  his  monthly  dues ;  *  nor  can  the  building  associa- 
tion be  subsequently  allowed,  in  such  case,  to  deny  the  valid- 
ity of  the  contract  or  resolution  under  which  it  was  done.3 

§  291.  But,  if  the  basis  of  the  claim  by  the  building  as- 
sociation is  an  act  or  contract  distinctly  forbidden  by  a  legis- 
lative prohibition  upon  the  society's  powers,  whether  in  the 
act  under  which  it  is  constituted,  or  by  the  laws  or  constitu- 
tion of  the  State,  the  building  association  will  not  be  permit- 
ted to  recover. 

Thus,  where  a  building  association,  in  the  face  of  a  con- 
stitutional prohibition  upon  all  corporations  attempting  to 
exercise  banking  powers,  except  such  as  were  properly 
qualified  for  that  particular  purpose,  had  assumed  to  engage 
in  the  business  of  purchasing  and  discounting  bills  and  notes ; 
the  maker  of  a  note  so  discounted  and  held  by  the  building 
association,  when  sued  thereon  by  the  same,  could  not  be  made 
liable  upon  it.4 

And  authority  given  by  a  charter  under  a  general  statute 
is  not  conclusive  upon  the  right  or  disability  of  the  society 

1  Hoboken  Building   Association  sociation,  50  Pa.  St.  82;  and  ante, 

v.  Martin,  2  Beas.  (N.  J.)  428.     See  §§    169-170.       Such    compromises 

ul-n  llekelnkaemperfl.  The  German  are  not  ultra  vires.      See  post,   § 

Building  and  Savings  Association,  323. 

22  Kas.  549.  *  Manufacturers  and  Mechanics' 

9  Eyre  v.    Building  Association,  Savings  and  Loan  Co.  v.  Conover, 

17  Leg.  Int.  (Pa.)  148;  and  ante,  §  5  Phila.  (Pa.)  18.     See  also  Laiug  c. 

133.  Reed,    Law  Rep.,    5   Ch.  App.  4; 

8  Miller  «.  Jefferson  Building  As-  39  L.  J..  Cli.  1 :  21  L.  T..  N.  S.  773; 


TIIE   LAW   OF   BUILDING   ASSOCIATIONS.       [dl.     XI. 

to  do  an  .act.  If  the  power  contained  in  the  charter  is  distinct- 
ly prohibited  in  the  act  under  which  it  is  granted,  or  antago- 
nistic to  its  scope  and  intention,  so  that,  if  it  obtains,  its  effect 
will  be  to  make  the  society  "  a  thing  different  from"  a  building 
association  under  the  act,  the  charter  provision  is  of  no  avail.' 
§  292.  Conversely,  under  such  a  state  of  the  law,  the 
building  association  cannot  be  made  liable  upon  contracts  it 
has  entered  into,  which  are  distinctly  forbidden,  either  by  ex- 
press statutory  provision,  or  where  the  intention  to  prohibit 
is  clearly  inferable.  The  most  important  controversies  which 
have  arisen  in  reference  to  this  subject  are  those  touching  the 
right  of  building  associations  to  borrow  money,  and  to  pur- 
chase and  hold  real  estate. 

Power  of  Building  Associations  to  Borrow  Money.    English  Cases. 

§  293.  The  question,  whether  a  building  association  can 
lawfully  hold  and  use  borrowed  capital,  can,  of  course,  arise 
only  under  a  statute  which  is  silent  upon  the  subject.  If  the 
statute  permits  or  prohibits  it  in  express  terms,  the  right,  in 
the  former  case,  is  precisely  measured  by  the  extent  of  the 
license  granted ;  the  disability,  in  the  latter,  established  be- 
yond question.  But  the  charter,  granted  under  a  statute 
which  does  not  expressly  settle  this  point,  may  also  become 
an  element  in  the  consideration  of  the  right ;  it  may  assume 
to  authorize  the  building  association  to  borrow  money,  or  it, 
too,  may  leave  the  subject  untouched.  The  difficulties  which 
appear  under  all  these  complications  have  received  most  care- 
ful consideration  in  England.  In  Laing  v.  Reed*  the  rules 
of  the  society,  as  certified  under  the  Act  6  and  7  "Will.  4,  C. 
32,  provided  "  that  its  object  is  for  raising,  by  the  weekly 
contributions  of  the  members,  a  stock  or  fund,  to  enable  each 
of  them  to  erect  or  purchase  a  dwelling-house,"  etc.,  and, 
"  that  the  trustees  for  the  time  being  may,  from  time  to  time, 
as  occasion  shall  require,  borrow  and  take  up  at  interest  any 
sum  of  money  from  any  banker  witli  whom  the  funds  of  this 
society  shall  be  deposited,  or  from  any  other  person,  to  pro- 

18  W.  R.  76;  34  J.  P.  134:  opinion  34  J.  P.  134;  and  ante,  §  64.  and 

of  Gifford,  L.  J.  post,  §§  305-307,  309. 

1  See  Laing  v.  Reed,  Law  Rep.,  s  Law  Rep.,  5  Ch.  App.  4;  39  L. 

5  Ch.  App.  4;  39  L.  J.,  Ch.  1;  21  J.,  Ch.  1;  21  L.  T.  Rep.,  N.  S.  773; 

L.  T.  Rep.,  N.  8.  773;  18  W.  R.  76;  18  W.  R.  76;  34  J.  P.  134. 


§  294.]  LEGALITY   AND   EFFECT  OF   CERTAIN  ACTS,  ETC.         293 

cure  which  the  trustees  may  give  their  own  personal  security, 
and  they  shall  be  indemnified  out  of  the  first  funds  of  this  so- 
ciety which  shall  be  received,"  adding,  "  that  the  total  sum 
of  money  to  be  borrowed  under  this  rule  shall  not  at  any  one 
time  exceed  two-thirds  of  the  amount  for  the  time  being  se- 
cured by  mortgage  to  the  society,  including  the  mortgage 
or  mortgages  for  which  such  advance  or  advances  may  be  re- 
quired." A  member  of  the  association  brought  a  bill  against 
the  trustees,  who  had,  under  these  rules,  borrowed  sums  of 
money  amounting  to  £66,362,  and  had  secured  their  repay- 
ment by  promissory  notes  given  to  the  lenders,  bearing  inter- 
est at  five  per  cent,  per  annum.  In  this  bill  he  alleged  the 
illegality  of  the  above  rule ;  that  borrowing  money  on  behalf 
of  the  association  was  ultra  vires,  and  a  breach  of  trust  on  the 
part  of  the  defendants ;  and  that  the  payment  of  interest  on 
the  loan  was  a  misappropriation  of  the  society's  funds,  for 
which  the  defendants  were  liable.  To  this  bill  the  defend- 
ants demurred.  Their  demurrer  was  overruled,  and  they  ap- 
pealed. The  Court  of  Appeals  in  Chancery  sustained  the 
demurrer,  and  held  that  the  rule  which  authorized  the  borrow- 
ing of  money  to  a  limited  extent  was  valid. 

§  294.  Hatherley,  L.  C.,1  after  distinctly  repudiating  the 
idea  that  the  certificate  of  incorporation  could  be  conclusive, 
if  a  comparison  with  the  Act  of  Parliament  showed  the  power 
it  granted  to  be  unlawful,  says :  "  If  the  rule  had  authorized 
the  trustees  to  raise  an  unlimited  sum  of  money,  wholly  re- 
gard less  of  the  contributions  which  might  be  made  by  its 
members,  that,  no  doubt,  would  be  contrary  to  the  intent  and 
scope  of  the  act.  The  act  states  that  money  shall  be  raised, 
first,  by  weekly  contributions  of  the  members ;  secondly,  by 
fines ;  and  thirdly,  by  the  payments  of  those  who  are  desirous 

of  acquiring  land Then  comes  the  question,  the  society 

having  these  funds,  are  they  or  are  they  not  to  be  allowed  to 
manage  them  in  such  a  way  as  they  may  think  best  and  most 
•conducive  to  their  own  interest?  If  we  consider  the  question 
of  investing  instead  of  borrowing,  there  is  nothing  in  the  Act 
of  Parliament  expressly  relating  to  investing ;  but  it  is  clear 
that  they  may  invest,  because  there  is  a  prohibition  against 
investing  in  savings  banks,  and  that  is  just  one  of  the  things, 

1  See  Ib. 


294  THE  LAW  OF  BUILDING   ASSOCIATIONS.          [CH.  XI. 

I  apprehend,  which  are  left  to  them  to  frame  rules  about.  .  .  . 
Then,  if  they  have  power  to  invest,  and  have  invested  their 
money,  it  might  be  injurious  and  inconvenient  for  the  society 
to  dispose  of  th'ose  investments  just  at  the  time  when  mem- 
bers required  advances.  Their  investments  might  be  in  the 
funds,  and  the  funds  might  be  so  low  as  to  make  it  inexpe- 
dient to  sell  out  at  that  time,  and  the  natural  course  would 
be  to  procure  the  money  elsewhere.  For  at  that  time  they 
would  probably  obtain  a  high  rate  of  interest,  not  being 
bound  by  the  usury  laws,  whilst  they  would  not  pay  more 

than  five  per  cent,  for  what  they  might  borrow If  an 

advance  were  wanted  when  they  had  not  money  in  hand, 
might  they  not  obtain  the  sum  required  by  overdrawing  their 
account  at  the  banker's  ?  "Would  anybody  say  that  that  would 
be  an  irregular  course,  provided  always  that  the  borrowing 
did  not  exceed  the  proper  amount  ?" 

§  295.  A  case,  decided  very  shortly  after  the  above,1 
raises  the  question  in  an  association  whose  rules  contained  no 
power  to  borrow.  "  What  we  have  here,"  says  Gifford,  L.  J., 
"  is  a  limited  benefit  building  society,  without  any  power  to 
borrow,  and  the  rules  and  very  nature  of  that  society  show 
that  it  would  be  contrary  to  its  constitution  to  borrow  money 
so  as  to  bind  the  company,  or  to  make  the  individual  members 
of  the  company,  as  members,  liable  for  borrowing  money ; 
because  the  whole  constitution  of  the  society  is  that  the  mem- 
bers are  to  make  certain  monthly  payments,  and  in  considera- 
tion of  these  monthly  payments  and  the  fines  provided  by  the 
rules,  they  are  to  receive  certain  loans.  After  the  rules  had 
been  certified  and  published,  and  the  nature  of  the  company 
had  been  fixed,  a  prospectus  was  issued,  and  by  that  pro- 
spectus the  directors  chose  to  say  'that  they  have  made  ar- 
rangement to  borrow  sums  to  be  advanced  to  such  members 
as  desire  to  receive  an  advance  before  their  turn  for  it  regu- 
larly arrives,  such  members  of  course  paying  interest  on  the 
sum  lent  until  their  turn  arrives.'  If  we  look  at  the  nature 
of  the  company,  that  can  only  amount  to  this:  that  the  direc- 
tors have  chosen  to  pledge  their  personal  liability.  .  .  .  I  am, 

1  In  re  National  Permanent  Bene-     22  L.  T.  Rep.,  N.  S.  284;  18  W.  R. 
fit  Building  Society,  ex  parte  Wil-     388;  34  J  P.  341. 
liamson,  Law  Rep..  5  Ch.  App.  309; 


§  298.]  LEGALITY    AXD   EFFECT   OF   CERTAIN    ACTS,  ETC.          295 

therefore,  of  opinion  that  there  is  no  legal  or  equitable 
debt." 

§  296.  In  the  case  of  the  Coetmor  Benefit  Building  So- 
ciety,1 the  rules  as  certified  contained  no  power  to  borrow; 
but  a  rule  (which  was  never  certified)  was  subsequently  added 
by  the  authority  of  a  general  meeting,  empowering  the  man- 
agers to  borrow  such  sums  as  they  might  consider  necessary 
for  the  purpose  of  making  advances  to  the  members.  A 
person  who  had  advanced  money  upon  the  faith  of  this  rule 
was  held  to  have  no  claim  against  the  assets  of  the  society, 
which  was  in  liquidation. 

§  297.  Agajn,  where  the  rules  contained  no  definite  power 
to  borrow7,  but  provided  that  persons  merely  joining  the  so- 
ciety to  invest  or  deposit  money  should  not  be  entitled  to 
vote  at  general  meetings,  and  that  "  investors  not  in  the  build- 
ing branch"  should  be  at  liberty  to  withdraw  on  giving  cer- 
tain notice ;  it  was  held  that  the  rules,  if,  and  so  far  as  they 
authorized  borrowing  money  on  deposit,  wrere  illegal,  as  no 
limit  was  fixed  to  the  amount  which  might  be  borrowed.2 
This  is  the  doctrine  established  in  Laing  v.  Reed,  and  fol- 
lowed in  another  case,  in  which  the  society  was,  by  its  rales, 
authorized  to  borrow  money  for  the  purposes  of  the  society, 
and  the  court  decided  that  the  rule,  as  authorizing  unlimited 
borrowing,  was  ultra  vires.* 

§  298.  But  a  rule  authorizing  the  borrowing  of  money,  for 
the  special  purpose  of  making  advances  to  members  who 
might  have  applied  for  them,  does  not  sanction  the  borrowing 
of  money  not  actually  required  to  meet  applications  at  the 
time  of  the  loan.4  When,  therefore,  trustees,  authorized,  by 
rule,  to  borrow  money  for  the  purposes  of  the  society,  bor- 
rowed and  spent  the  money  in  a  way  which  was  held  not  to 
be  for  the  legitimate  purposes  of  the  society,  the  lender  was 

1  51  L.  T.  258;  M.  R.,  31  July,  Society,  McCorwan's  Claim,  15  S. 

1871.  J.  177.     See  also,  In  re  Professional, 

8  In  re  Victoria  Permanent  Build-  Commercial,  and  Industrial  Benc- 

ing  Society,  Hill's  Case,  Jones' Case,  fit  Building  Society,  6  L.  R..  Ch. 

Law  Rep.,  9  Eq.  605;  S.  C.  39,  L.  850;  25  L.  T.,  N.  S.  397;  19  W.  K. 

J.,  Ch.  628;  6  Mag.  Cas.  474;  22  L.  115:5. 

T.  Rep.,  N.  S.  777;  34  J.  P.  532;  18        *  Moye  v.  Sparrow,  22L.T.  Rep., 

W.  R.  967.  N.  S.  154;  S.  C.,  18  W.  R  400;  5 

1  In  re  Liverpool,  etc..  Building  W.  N.  33. 


296  THE   LAW   OF   BUILDING   ASSOCIATION'S.          [CH.  XI. 

not  allowed  to  claim  payment  against  the  society.1  But 
another  creditor  of  the  same  society,  having  had  deeds  belong- 
ing to  some  of  the  members  deposited  with  him  by  the 
trustees,  as  a  collateral  security  for  the  money  lent,  the  court 
refused  to  compel  him  to  return  the  deeds  unless  the  money 
for  which  he  held  them  as  security  was  repaid  to  him.8 

§  299.  The  doctrine,  as  established  by  the  English  deci- 
sions, before  the  Act  of  37  and  38  Vic.,  C.  42,  which  permits 
building  associations  to  borrow  money  within  certain  limits, 
may  be  summed  up  as  follows:  Without  a  certified  rule  (i.e., 
a  provision  contained  in  the  charter  or  constitution  estab- 
lished or  amended  under  the  General  Statute)  authorizing  the 
borrowing  of  money,  the  society  has  no  power  to  raise  money 
on  loan ;  if  there  was  a  certified  rule,  its  provisions  must  be 
strictly  observed,  or  loans  obtained  under  it  are  invalid ;  and 
even  a  rule  which  is  certified  is  illegal,  unless  it  sets  some 
reasonable  limit  upon  the  sums  to  be  borrowed  from  time  to 
time.8 

Mere  Overdrawing  of  Bank  Account  is  not  Borrowing. 

§  300.  The  mere  overdrawing  of  its  bank  account  by  an 
association  is  not  a  borrowing  of  money,  in  the  proper  sense 
of  the  word,  which  may  be  questioned  as  ultra  vires.4 

1  In  re  Durham  County  Building  sconded.  It  was  held  that  the  find- 
Society,  Davis's  Case,  Law  Rep.,  12  ing  was  bad  in  law  as  against  the 
Eq,  516;  S.  C.,  25  L.  T.  Rep.,  N.  society,  and  that  the  latter  was  not 
S.  83  liable;  but  (semble)  the  directors, 

9  In  re  Durham,   etc.,   Wilson's  even  though  there  was  no  fraud, 

Case,  Law  Rep.,  12  Eq.  521;  S.  C.,  were  personally  liable  to  the  plain- 

25  L.  T.  Rep.,  N.  S.  84.  tiffs   for  the    money.     Chapleo  t. 

3  See    Davis,   Law  of  Building,  Brunswick     Permanent     Building 

etc.,  Societies,  p.  114.  In  a  recent  case  Society   et    al.,    L.    R.,   6  Q.    B. 

in  England,  money  was  loaned  to  a  696. 

building  association  in  excess  of  its  *  See  opinion  of  Hatherley,  L.  C., 

powers  under  the  rules,  the  secre-  iu  Laing  t.  Reed.  Law  Rep..  5  Ch. 

tary  taking  tl.e  money,  and  procur-  App.  4.     See  also  same  principle  in 

ing  a  note  from  the  directors  to  the  Waterlow    v.    Sharp;    Gardner    v. 

lenders.     Finally  the  secretary  ab-  Sharp,  Law  Rep.,  8  Eq.  501;  20  L. 

sconded  with  the  money,  and  the  T.   Rep.,  N.   S.   902;  In  re  Cefn 

society,  refusing  to  make  it  good,  Cilcen  Mining   Co.    (Lim.),    Edge- 

wns  sued.     The  jury  found  that  the  worth's  Claim,  Law  Rep.,  7  Eq.  88; 

society  held  out  the  secretary  to  the  19  L.  T.  Rep.,  N.  S.  593;  also  In  re 

plaintiffs  as  having  authority  to  re-  German  Mining  Co.,  22  L.  J.,  Ch, 

ceive  the  loan  with  which  he  ab-  956;  4DeG.,  M.  aud  G.  19. 


§  301.]    LEGALITY   AND   EFFECT  OF   CERTAIN   ACTS,  ETC.        29? 
Rule  in  America  as  to  Borrowing  Powers. 

§  301.  Such  being  the  accepted  law  in  England,1  there  i& 
nothing  in  American  decisions  pointing  out  any  particular  in 
which  it  would  fail  of  general  recognition  in  this  country, 
except  where  the  construction  put  upon  the  statutes  of  indi- 
vidual States  may  restrict  it.  In  Maryland,  notes  signed 
and  given  by  building  associations  to  members,  instead  of 
money,  the  members  giving  mortgages  to  the  building  asso- 
ciation for  the  proceeds  of  the  notes,  the  same  as  if  they  had 
received  money,  have  been  repeatedly  enforced,  and  their 
capacity  to  borrow  money,  with  a  view  to  accomplish  the 
purposes  of  their  formation,  expressly  recognized.2  But  in 
Pennsylvania,  there  is  a  dictum  of  Sharswood,  C.  J.,  which 
intimates,  that,  under  the  Act  of  1859,  a  building  association 
is  not  permitted  to  borrow  money  from  banks  or  others,  for 
the  purpose  of  loaning  it  to  its  members  at  interest  in 
excess  of  six  per  cent,  per  annum.3  And  in  Ohio,  the  power 
of  building  associations  to  borrow  money  for  the  purpose  of 
lending  it,  is  expressly  denied.4  The  case,  however,  in  which 
the  question  there  arose,  disclosed  the  fact  that  the  money 
was  borrowed  by  the  building  association  partly  for  the  pur- 
pose of  trafficking  in  its  own  stock.  This  is,  in  itself,  an 
illegal  purpose;  whilst  the  only  reason  for  permitting  a 
building  association  to  incur  debt,  is,  that  it  may  thereby  be 
enabled  to  accomplish  its  lawful  ends.  By  borrowing  money 
at  a  low  rate  of  interest,  and  loaning  it  at  a  greater  to  its 
members  standing  in  need  of  accommodation  beyond  what  the 
immediate  resources  of  the  society's  treasury  may  afford,  it  is 
substantially  serving  its  legitimate  purposes.  Such  probably 
would  not  be  the  case  if  the  loan  were  intended  to  supply 
funds  to  be  taken  by  strangers;  or  if  they  were  to  be  perma- 
nent debts  of  the  society,  instead  of  temporary  accommoda- 
tions for  the  purpose  of  serving  temporary  wants.  The  same 

1  Applicable  to  building  societies  ing  Association  v.  "Weber,  84  Md. 

incorporated  previous  to  the  Act  of  669;  Jackson  et  al.  v.  Myers  et  al., 

37  and  38  Vic.  C.  42  (1874),  which  43  Md.  452;  Muth  v.  Dolfleld,  Ib. 

expressly  confers  the  power  of  bor-  466.     But  see  ante,  p  24  (j). 
rowing  within  certain  limits.  •  Stiles's  App.,  9  W.  X.  C.  (Pa.) 

9  Davis    v.    The    AVcst    Saratoga  83. 

Building  Union  No.  3.  32  Md.  285.         *  State  v.  The  Oberlin  Building 

See  also  the  Canton  National  Build-  and  Lonn  A^'n,  :J5  Ohio  St.  258. 


298  THE   LAW   OF  BUILDING   ASSOCIATIONS.        [CH.  XI. 

reasons  would  not,  in  such  cases,  hold  good.  It  is  quite 
possible  that  cases  will  arise,  where  a  building  association 
will  -be  enabled,  by  reason  of  peculiar  necessities,  to  borrow 
money  or  give  its  obligations  for  other  purposes  than  the 
accommodation  of  members.  For  instance,  where,  at  a  judi- 
cial sale  (and  in  Pennsylvania,  at  that  of  an  assignee  for 
benefit  of  creditors)  the  building  association  is  constrained, 
in  order  to  escape  serious  loss,  to  buy  in  property  upon 
which  it  holds  a  junior  encumbrance,  and  there  is  not  money 
enough  in  the  treasury  to  pay  the  whole  sum  required,  a 
purchase-money  mortgage,  or  a  bond,  mortgage,  note,  or 
judgment  for  the  sum  borrowed  to  make  up  the  deficiency, 
would  seem  entirely  unobjectionable.  In  such  case,  it  might 
become  essential  to  the  accomplishment  of  powers  distinctly 
conferred,  if  not,  indeed,  from  reasons  of  self-protection,  and 
in  order  to  save  the  association  from  ruin.  Again,  under  a 
general  power  to  invest  money  in  real  estate,  the  right  of 
improving  the  real  estate  held,  and  making  it  not  only  more 
productive,  but  substantially  an  element  in  the  achievement 
of  the  final  results  contemplated  in  the  incorporation,  and  the 
hastening  of  the  period  of  realization  to  the  stockholders,  by 
erecting  houses,  seems  a  necessary  concomitant ;  nor  would  a 
loan  of  money,  of  a  temporary  character,  to  accomplish  that 
end,  seem  at  all  improper.  It  is  possible,  too,  that  the  affairs 
of  an  association,  becoming  momentarily  embarrassed  by 
losses,  sometimes  not  to  be  avoided  by  the  most  unexception- 
able management,  or  by  depreciation  of  property  necessarily 
thrown  and  remaining  upon  its  hands,  a  loan  of  money  to  bridge 
over  the  difficulties  would  be  within  the  corporate  powers. 
But,  to  allow  the  lender  to  stand  as  a  creditor  of  the  building 
association  before  the  law,  and  to  debar  it  from  invoking  a 
plea  of  ultra  vires,  the  power  to  borrow  must  be  given, 
specifically  and  limited,  in  the  charter  or  articles  of  associa- 
tion, or  by  proper  amendments  thereto,  to  the  officers 
attempting  to  exercise  it,  even  where  there  is  nothing  in  the 
statute  repugnant  to  such  authority;  and  it  must  clearly 
appear,  that  the  loan  was  made  for  purposes  legitimately 
within  the  scope  of  the  association's  incorporation. 

§  302.  A  case  arose  in  Pennsylvania,  in  which  it  appeared 
that  a  building  association  had,  acting  ultra  vires,  purchased 


§302.]    LEGALITY    AND   EFFECT   OF   CERTAIN    ACTS,  ETC.        299 

land,  giving  its  bond  and  mortgage  for  part  of  the  purchase- 
money.  An  act  of  Assembly  was  subsequently  passed  vali- 
dating purchases  of  land  by  building  associations.  Yet  it 
was  held  by  the  Supreme  Court,  that  this  did  not  render 
valid  the  contract  as  to  the  unpaid  purchase-money,  which 
could  not  be  collected  upon  the  bond  except  only  as  against 
the  land  on  account  of  the  purchase-money  for  which  the 
bond  was  given,  and  which  constitutes  an  equitable  lien, 
and  that  any  execution  upon  any  judgment  obtained  must  be 
confined  to  the  real  estate,  and  could  not  be  enforced  against 
the  society  itself.1  The  questions  involved  in  this  case  are 
rather  nice,  upon  the  facts  shown.  On  June  14, 1873,  A.  sold 
to  the  American  Building  and  Loan  Association,  incorpo- 
rated under  Act  1859,  fifty  acres  of  land,  at  $400  per  acre.  lie 
got  §4000  cash,  and  the  building  association's  bond  and  mort- 
gage for  $8000,  payable  in  five  equal  annual  instalments,  with 
interest.  The  building  association  also  assumed  the  payment 
of  a  purchase-money  mortgage  of  $8000,  resting  on  the  land. 
No  part  of  the  land  was  sold  by  the  building  association,  and 
no  part  of  the  purchase-money  mortgage  was  paid.  In  course 
of  time,  A.  received  all  but  $1600  upon  his  mortgage,  and 
he  assigned  this  remaining  installment,  part  to  F.  and  part  to 
R.  The  building  association,  on  June  11,  1878,  was  dis- 
solved, and  a  receiver  appointed.  Suit  was  brought  against 
the  building  association  (A.  to  the  use  of  F.  and  R.)  to  re- 
cover the  balance  of  purchase-money  due  by  the  building 
association  on  their  bond  and  mortgage  to  A.  On  September 
17,  1879,  before  the  suit  came  on  for  trial,  the  receiver  filed 
a  bill  in  equity,  praying  that  the  purchase  of  the  land  by 
the  building  association  from  A.  be  declared  void  and  ultra 
vires  /  that  the  receiver  be  directed  to  isconvey  the  land  to 
A.  ;  that  A.  be  directed  to  refund  the  money  paid  him  by 
the  building  association;  that  an  injunction  issue  restrain- 
ing the  defendant  from  further  prosecuting  his  action  at  law. 
The  contention  of  defendants  before  the  Master  was.  that. 
though  at  the  time  the  purchase  was  made,  the  building 
ciation  had  no  power  to  purchase  real  estate  as  this  pureha-e 
was  made,  or  to  issue  bonds  and  mortgages  thereon,  yet,  that, 
by  virtue  of  the  Act  of  Assembly  of  June  17,  1878  (P.  L. 

1  Faulkner's  Appeal,  11  W.  N.  C.  (Pa.)  48. 


300  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  XI. 

214),  confirming  purchases  and  sales  made  by  building  asso- 
ciations prior  to  the  act,  the  sale  made  in  this  case  was  vali- 
dated and  confirmed ;  that  the  contract  between  A.  and  the 
building  association  was  an  executed  one,  and  therefore  the 
building  association  estopped  from  setting  up  the  defence  of 
ultra  vires.  The  Master  reported,  that,  at  the  time  of  the 
purchase,  the  building  association  had  no  power  to  make 
such  a  purchase,  or  to  give  bonds  and  mortgages  thereon, 
and  that,  in  his  judgment,  the  Act  of  June  17,  1878  (P.  L. 
214),  "  fails  to  relieve  the  defendants  here,  mainly  because  it 
contains  no  provisions  making  valid  bonds  and  mortgages 
executed  without  authority  of  law."  He  recommended  that 
the  purchase  and  sale  be  declared  void,  and  that  the  receiver 
be  directed  to  reconvey  to  A.,  the  latter  to  refund  what  the 
society  had  paid  him.  The  court,  upon  exception,  held  that 
the  Act  of  1878  validated  the  title  of  the  corporation,  at  least 
so  far  as  to  enable  it  to  hold  the  land,  if  it  elected,  and  to 
convey  the  title;  but  that,  aside  from  the  liability  of  the 
land  or  its  proceeds,  the  act  does  not  validate  the  unpaid 
obligations  for  the  purchase-money.  "  The  defendants  should 
be  permitted  to  proceed  on  either  their  bond  or  mortgage  to 
enforce  payment  on  the  land ;  but  the  lien  of  an  execution 
on  any  judgment  thereon  must  be  limited  to  the  land  in  ques- 
tion. But  the  defendant  cannot  be  called  on  to  repay  the 
money  already  paid  him."-  The  defendants  were,  therefore, 
enjoined  from  prosecuting  their  action  on  the  bonds,  except 
only  as  against  the  land  on  account  of  the  purchase-money 
for  which  the  bond  was  given ;  and  that  they  be  confined  and 
limited,  upon  any  execution  which  may  be  issued  upon  any 
judgment  thereon,  to  said  real  estate.  The  defendants  ap- 
pealed. The  Supreme  Court  say  :  "  We  are  of  opinion  that 
the  purchase  by  the  building  association  was  ultra  vires.  Con- 
ceding that  it  was  validated  by  the  Act  of  Assembly,  of  1878, 
we  agree  with  the  court  below,  that  the  contract  for  the  unpaid 
purchase-money  was  not  rendered  valid  upon  their  surrender- 
ing the  land  and  putting  the  parties  in  statu  quo.  This  is 
precisely  what  is  accomplished  by  the  decree  below,  which 
limits  the  recourse  of  the  vendors  for  the  unpaid  purchase- 
money  to  the  land.  So  far  the  contract  is  unexecuted.  So  far 
as  the  purchase-money  was  paid,  the  corporation  certainly 


§  303.]    LEGALITY    AND    EFFECT   OF   CERTAIN    ACTS,  ETC.         301 

cannot  claim  to  avoid  the  contract,  and  recover  back  the 
money.  The  doctrine  of  estoppel  fairly  applies.  But  not 
as  to  the  unpaid  purchase-money.  We  are  of  opinion  that 
the  decree  below  does  exact  justice  between  the  parties." 

Power  of  Building  Associations  to  Acquire  and  Hold  Land. 

§  303.  The  power  of  a  building  association  to  take  and 
hold  real  estate  stands  upon  a  somewhat  different  footing. 
The  extent  to  which  it  may  be  lawfully  exercised  is  usually 
denned  with  accuracy  in  the  statutes  under  which  they  are 
incorporated,  and,  like  all  corporations,  building  associations- 
are  in  this  particular  subject  to  the  law's  jealous  supervision. 
An  .improper  assumption  of  authority  in  this  direction  will 
not,  of  itself,  dissolve  the  society,1  nor  relieve  its  members  * 
or  debtors  s  of  their  obligations  towards  it.  But  corporations 
cannot  take  or  hold  property  in  excess  of  what  their  charters, 
or  the  statute  supreme  over  them,  allows  them.4  The  asso- 
ciation, therefore,  cannot  be  held  to  compliance  with  the  con- 
tract ;  *  and  if  it  is  carried  into  effect,  the  sales  and  purchases, 
being  unauthorized,  may  be  avoided  by  any  party  in  inter- 
est,' and  the  individual  who  assumed  to  enter  into  the  con- 
tract for  the  corporation,  may  become  personally  liable 
thereby.7  It  has  been  suggested,8  that  the  only  method  by 
which  a  building  association,  incapable  of  holding  real  estate 
to  an  unlimited  extent,  and  desirous  of  dealing  in  it  beyond 
the  limits  allowed  by  law  and  charter,  is  to  let  the  directors 
or  some  other  fit  person  take  the  title,  and  mortgage  the 
property  to  the  society  for  the  full  amount  of  the  purchase- 
money. 

1  See  Hughes  v.  Layton,  33  L.  J.,  with  by  the  State.  See  Rhoads  v. 
M.  C.  89;  10  Jur.,  N.  S.  513;  S.  C.,  Hoernerstown  Building  Associa- 
nom.  Reg.  v.  D'Eyncourt,  9  L.  T.  tion,  82  Pa.  St.  180. 
Rep.,  N.  S.  702;  28  J.  P.  116;  4  8  In  re  Kent  Benefit  Building  So- 
Best  and  S.  820;  12  W.  R.  408;  S.  ciety,  30  L.  J.,  Ch.  787;  4  L.  T. 
C.,  nom.  Hughes  v.  D'Eyncourt,  3  Rep.,  N.  S.  610;  7  Jur.,  N.  S.  1045; 
N.  R.  420;  116  Engl.  C.  L.  Rep.  1  Dr.  and  Sm.  417;  9  W.  R.  686;  25 
819.  See  post,  §  309.  »  Ib.  J.  P.  805;  Faulkner's  App..  11  W. 

3  See  ante,  §§  200,  232,  289.  N.  C.  (Pa.)  48;  and  post,  S  307. 

4  Chamberlain    T.    Chamberlain,  6  Miller's  Est.,  2  Pears.  (Pa.)  248. 
43  N.  Y.  424,  reversing  decision  of  '  See  ante,  §§  209-210.  •>!   J'.''.' 
Supreme  Court,  that  the  corporation  8  Duvis.    Law  of  Building,  etc., 
can  take  and  hold,  until  interfered  Societies,  p.  75. 


302  THE   LAW   OF  BUILDING   ASSOCIATIONS.         [CH.  XI. 

§  304.  Building  associations,  chartered  as  such,  in  the 
proper  signification  of  the  term,  exclusively,  very  frequently 
engage  in  a  species  of  real  estate  transactions,  more  properly 
belonging  to  what  in  England  is  called  Freehold  Land  Socie- 
ties: i.e.,  they  purchase  land,  and  either  without  or  after 
erecting  dwellings  thereon,  parcel  it  out  to  their  members, 
bidding  in  competition  for  preference,  as  for  a  loan,  the  suc- 
cessful competitor  giving  his  mortgage  uppn  the  'property  so 
acquired  to  the  society ;  or  they  sell  the  different  properties  at 
auction  to  outsiders.  Such  practice,  unless  clearly  authorized 
by  statute  and  charter,  is  illegal  in  every  step,  from  the  acqui- 
sition of  the  land,  down  to  the  final  disposition  of  it.  There 
is  nothing  in  the  objects  of  such  societies  permitting  them  to 
speculate  in  land,  in  fact,  to  become  land  societies.  The  ques- 
tion has  received  exhaustive  consideration  in  England,  and  the 
doctrine  as  there  laid  down  seems  entirely  applicable  in  the 
United  States. 

English  Decisions  on  Power  to  Acquire  Land.     Liability  of  Directors 
Acting  Ultra  Vires. 

§  305.  In  Grimes  v.  Harrison,1  the  latter  question  was 
first  discussed.  By  the  first  rule  of  "  The  Prince  of  Wales 
Mutual  Benefit  Building  Society"  (duly  registered)  it  was 
stated  that  the  object  of  the  society  "  was  to  raise  a  fund  by 
weekly  subscriptions  of  the  members  in  shares  of  twenty-five 
pounds  each,  out  of  which  each  member  may  receive  the 
amount  or  value  of  his  share  for  the  erection  or  purchase  of  a 
dwelling-house  or  houses,  or  other  real  or  leasehold  estate." 
The  thirty-first  rule  provided,  that  "  the  board  shall  have  full 
power  to  conduct  the  affairs  of  the  society,  subject  only  to 
the  rules  thereof  for  the  time  being,  and  any  committee  to  be 
selected  and  appointed  shall  have  the  same  power  in  respect  of 
any  matter  confided  to  them,  subject  to  the  control  from  time 
to  time  of  the  board."  Upon  the  affairs  of  the  society  being 
investigated,  it  having  fallen  into  difficulties,  it  was  found  that 
the  directors  had  made  an  attempt  to  vary  the  objects  of  the 
society,  and  that  they  had  altered  its  name  as  follows:  ''The 
Northwest  London  Equitable  Freehold  Land  Society,  enrolled 

1  28  L.  J.,  Ch.  823;  S.  C.,  33  L.  T.  Rep.  115;  5  Jur.,  N.  S.  528;  26  Beav. 
135;  23  J.  P.  421. 


§  305.]    LEGALITY    AXD    EFFECT   OF   CERTAIN    ACTS,    ETC.        303 

as  the  Prince  of  "Wales  Mutual  Benefit  Building  Society,"  and 
that  they  had  issued  pass-books,  containing  a  copy  of  the  rules 
of  the  society  and  the  accounts  of  the  individual  member.-. 
It  was  also  found  that  they  had  contracted  to  purchase  a  piece 
of  land  at  a  price  greater  than  the  moneys  of  the  society  then 
in  hand,  and  that  they  had  caused  portions  of  the  purchase- 
money  to  be  paid  out  of  the  funds  of  the  society.  Upon  a  bill 
being  filed  by  some  of  the  members  of  the  society  against  the 
trustees  and  directors,  charging  (inter  alia)  that  the  invest- 
ment was  a  fraud  on  the  rules  of  the  society,  it  was  held  that 
it  was  such  a  fraud,  for  the  objects  of  the  society  could  not 
be  changed,  that  the  rules  of  the  original  society  could  not  be 
adapted  to  any  altered  purpose,  and  that  the  rules  did  not 
authorize  the  purchase  of  land.  The  Master  of  the  Rolls,  in 
delivering  judgment,  said  that  there  is  a  great  distinction  be 
tween  a  freehold  land  society  and  a  benefit  building  society. 
"  A  freehold  land  society  buys  land  with  the  funds  subscribed 
by  the  members,  and  divides  that  land  among  them;  but  a 
benefit  building  society  advances  to  members,  out  of  the  sub- 
scriptions made  by  the  members,  sums  of  money,  to  be  laid 
out  in  the  purchase  of  land  or  buildings,  which  are  then  mort- 
gaged to  the  society.  That  appears  to  be  the  principal  differ- 
ence between  these  two  kinds  of  societies.  But  in  either  <-a.-e 
these  societies  must  be  bound  by  the  rules  by  which  they  have 
been  constituted.  It  does  not  lie  in  the  mouth  of  any  mem- 
ber of  the  society  to  say  that  the  book  which  professes  to 
contain  the  rules  of  the  society  does  not  contain  the  rules  by 
which  they  are  bound.  ...  I  cannot  accede  to  the  argu- 
ment that,  as  between  the  members  of  the  society,  the  fact  oi . 
putting  a  title-page  to  the  pass-book,  in  which  the  society  i> 
culled  a  freehold  land  society,  will  really  alter  the  rules.  an«i 
convert  them  into  something  other  than  what  they  purporr  n» 
be  upon  the  face  of  them.  ...  It  appears  that  the  certilicate 
of  Mr.  Tidd  Pratt  was  obtained  without  any  intimation  that 
the  words  '  freehold  land  society '  constituted  the  title  of  the 
society,  or  that  it  was  intended  in  any  respect  to  be  n  free- 
hold land  society.  It  was  sworn  that  this  omission  was  made 
purposely,  because  it  was  known  that  Mr.  Tidd  Pratt  would 
not  certify  the  rules  of  the  society,  if  called  a  freehold  land 
society,  to  be  within  the  provisions  of  the  <>  and  7  Will. 


304  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  XI. 

4,  0.  32,  but  would  only  certify  it  as  a  benefit  building  society. 
Therefore  it  is  impossible  to  adopt  the  argument,  that  the 
court  can  mould  these  rules  so  as  to  make  them  applicable  to 
a  freehold  land  society,  when,  by  the  suppression  of  the  fact 
that  this  was  a  freehold  land  society,  or  was  intended  to  be 
so,  these  parties  have  obtained  from  the  officer  appointed  by 
the  legislature  the  benefit  and  advantage  derived  from  being 
a  benefit  building  society,  solely  because  the  society  was  not 
known  or  believed  to  be  a  freehold  land  society.  It  is  there- 
fore impossible  to  modify  these  rules  so  as  to  make  them  ap- 
ply to  a  freehold  land  society."  His  Lordship  further  pointed 
out  that  Rule  1,  above  set  out,  did  not  give  the  directors 
power  to  purchase  land  as  they  thought  fit,  even  if  it  were 
lawful  to  do  so,  but  that  the  obvious  meaning  of  the  rule  was, 
that  "  the  amount  or  value  of  the  share"  of  each  member  was 
to  be  applied  "  for  the  erection  or  purchase  by  him  of  a  dwell- 
ing-house, or  other  real  or  leasehold  estate,"  and  it  contained 
no  authority  to  the  directors  to  purchase  and  divide  land 
amongst  the  members,  which  might  be  the  function  of  a  free- 
hold land  society,  but  not  of  a  benefit  building  society.  "  It 
is  not  within  these  rules ;  and  every  member  is  entitled  to  say 
to  the  directors,  "  You  shall  not  go  out  of  these  rules ;"  and 
the  fact  of  the  society  being  entitled  a  Freehold  Land  Society, 
or  of  the  pass-book  being  an  account  of  a  freehold  land  society, 
or  of  the  minutes  being  kept  as  the  minutes  of  the  proceed- 
ings of  a  freehold  land  society,  does  not  entitle  the  directors 
so  to  act,  or  preclude  any  one  of  the  members  who  may  think 
fit  from  taking  the  objection  to  their  acting  in  disobedience 
of  rules  to  which  they  are  bound  to  conform."1 

§  306.  So,  in  another  case,  it  was  held  that  changing  the 
name  of  a  society  to  that  of  "The  Kent  Freehold  Land- 
Society,  enrolled  as  The  Kent  Benefit  Building  Society,"  did 
not  constitute  it  a  freehold  land  society,  although  the  change 
was  made  with  the  concurrence  of  the  members.1 

1  This  case  did  not  impeach  the  2  In  re  The  Kent  Benefit  Building 

right   of    the  directors  of    benefit  Society.  30  L.  J.,  Ch.  785;  S.  C.,  4 

building  societies  to  invest  their  sur-  L.  T.  Rep.,  X.  S  610;  7Jur.,  N.  S. 

plu»  funds  in  land  under  the  old  1045;  1  Dr.  and  Sm.  417;  9  W.  R 

law,  hut  only  referred  to  specula-  686;  25  J.  P.  305. 
tions  in  land. 


§307.]    LEGALITY   AND   EFFECT   OF   CERTAIN   ACTS,  ETC.        305 

§  307.  The  position,  as  defined  in  these  cases,  is  this :  (1) 
A  society  which,  by  its  rules,  authorized  the  directors  to  deal 
in  land  like  a  land  society,  or  beyond  the  limits  contemplated 
by  the  statute,  could  not  be  registered  as  a  building  associa- 
tion under  it ; '  and  (2)  if  the  rules  did  not  so  authorize  the 
directors,  they  would  have  no  power  to  do  so,  and  any  member 
might,  if  he  desired,  proceed  against  them  in  equity.2  Since, 
therefore,  it  cannot  be  done  at  all  without  authority  contained 
in  the  »rules  or  constitution  of  the  society ;  and  since  such 
rules,  if  made,  are  illegal,  the  association  or  its  officers  must, 
in  either  case,  be  deemed  to  be  acting  ultra  vires ;  the  asso- 
ciation taking  no  title  in  the  land  contracted  for;  and,  conse- 
quently, its  contract  for  the  purchase  of  land,  under  such  cir- 
cumstances, cannot  be  enforced  against  it.3  And  where  the 
society  had  the  power  to  borrow  money  "  for  the  purposes  of 
the  society,"  a  debt,  which  its  directors,  pretending  to  act 
under  that  authority,  had  contracted  for  the  purpose  of  pur- 
chasing a  landed  estate,  was  held  not  to  be  a  claim  against  the 
assets  of  the  corporation  under  process  of  winding-up,  Bacon. 
Y.-C.,  saying:  "  Such  transactions  are  not  within  the  powers- 
of  the  society.  They  might  as  well  have  betted  upon  the- 
horses  running  at  Goodwood,  or  done  anything  else  that  came 
into  their  heads." 4  The  building  association  not  having  had 

'This  does  not,  however,  extend  law  to  have  acquired  land,  and  after- 
to  making  a  rule  illegal,  under  the  wards  to  have  entered  into  a  contract 
old  act  in  England,  allowing  the  for  its  sale,  it  is  doubtful  whether 
directors  to  invest  a  portion  of  the  .the  trustees  could  enforce  the  con- 
society's  surplus  funds  in  the  pur-  tract  if  they  did  not  obtain  the  con- 
chase  of  real  estate-,  provided  this  currence  m  the  deed  of  conveyance 
be  done  bonn  fide,  and  in  further-  of  every  member  of  the  society,  un - 
am-e  of  their  main  objects;  Mullock  less  it  was  expressly  stipulated  in 
r.  Jenkins.  14  Beav.  628;  21  L.  J.,  the  contract  for  sale  that  the  trus- 
Ch.  65.  tees  should  be  the  only  conveying 

*  See  Davis,  Law  of  Building,  etc.,  parties;"  cit.   Lethbridtre  r.    Kirk- 

Societies,  p.  72.    Ante.  ££  114.  213.  man,  25  L  J  ,  Q.  B.  89;  S.  C..  2  Jur.. 

3  In  re  Kent  Benefit  Building  So-  N.  S.  372;  26  L.  T.  Rep.  122.     See 

ciety.  30  L.  J.,  Ch.  787;  S.  C.,  4  L.  Caldwell  v.   Ernest,  28  L.  J.,  Ch_ 

T.  Rep.,  N.  S.  610:  7  Jur.,  N.  S.  810:  27  Beav.  39. 

1045;  1  Dr.  and  Sm.  417;  9  W.  R.  4  In  re  Durham   County  Perma- 

686;  25  J.  P.  805.     It  is  further  said,  nent  Investment  Land  and  Building 

in  Davis,  Law  of  Building,  etc.,  So-  Society  Davis's  Case,  Law  Rop.,  12 

cieties,  p.  76,  that  "  supposing  the  Eq.  516;  S.  C.,  25  L.  T.  Rep.,  N.  S. 

trustees  of  a  society  under  the  old  83. 


306  THE    LAW   OP   BUILDING   ASSOCIATIONS.         [CH.   XI. 

the  right  to  borrow  the  money  for  the  purpose  to  which 
it  was  applied,  it  was  further  said,  the  principle  that 
the  lender  may  follow  the  money  into  the  land  could  be  of  no 
assistance  to  him  in  this  case.1  If,  on  the  other  hand,  the 
officers  who  made  the  illegal  contract  became  personally  liable 
by  reason  of  it,  this  imposes  no  obligation  upon  the  mem  be  i^ 
to  indemnify  the  suffering  transgressors.  The  rule  is,  that, 
as  between  the  officers  and  the  society,  the  latter  may  become 
committed  to  a  transaction  of  the  former  which  is  ultra  vires, 
by  unanimous  consent  and  ratification.  Where,  therefore,  the 
directors  of  a  building  association,  without  competent  author- 
ity, bought  land  and  mortgaged  it  to  secure  money  borrowed 
for  the  purchase ;  and  certain  members,  acting  as  trustees, 
covenanted  to  pay  the  mortgage  debt,  and  under  that  cove- 
nant were  subsequently  obliged  to  pay  it,  and  it  did  not 
appear  that  every  member  acquiesced  in,  or  was  cognizant  of 
the  transaction ;  the  unfortunate  trustees  were  not  allowed  to 
compel  contribution  among  the  shareholders  to  recover  their 
loss.2  But,  where  the  corporation  had  purchased  land,  but 
had  not  paid  the  purchase-money,  the  vendor  retaining  an 
equitable  lien  thereon ;  the  properties  purchased  from  the 
building  association,  upon  the  latter's  failure  to  pay  the  vendor, 
were  held  subject  to  his  claim,  although  the  owners  had  paid 
the  building  association  in  full.3 

American  Rule  as  to  Power  to  Acquire  and  Hold  Land. 

§  308.  Analogously  with  the  principles  established  in  the 
foregoing  cases,  it  has  been  repeatedly  held  in  Pennsylvania, 
that  a  building  association  has  no  power  to  take  or  hold  real 
estate  beyond  the  limits  fixed  by  statute,4  an  i  that  debts  con- 

1  But  where  a  loan  to  the  same  Wilson's  Case,  Law  Rep.,  12  Eq. 

society  was  secured  by  a  promissory  521 ;  S.  C. ,  25  L.  T.  Rep. ,  N.  S.  84. 

note  of  the  trustees,  and  by  a  de-  s  In  re  Kent  Benefit  Building  So- 

posit  of  the  mortgage  deeds  execut-  ciety,  30  L.  J.,  Oh.  785;  S.  C.,  4  L. 

ed  by  the  members  of  the  society;  T    Rep.,  N.  S.  610;  7Jur.,  N.  S. 

it  was  held  (without  deciding  upon  1045;  1  Dr.  and  Sm.  417;  9  "W.  R. 

the  right  of  the  lender  to  enforce  686;  25  J.  P.  805. 

hie  security  against  the  society),  that  *  Peto  v.  Hammond,  8  Jur.,  N. 

the  official  liquidator  was  not  enti-  S.  550;  31  L.  J.,  Ch.  354;  30  Beav. 

tied,  without  payment  of  the  money  495. 

advanced,  to  deprive  the  lender  of  4  Miller's  Estate,  2  Pearson  (Pa.), 

his  securities.     In  re  Durham,  etc.,  248;  Rhoadsa.  Hoernerstown  Build- 


§  309.]    LEGALITY   AND   EFFECT  OF  CERTAIN   ACTS,  ETC.        307 

tracted  by  it  in  purchasing  real  estate  cannot  be  enforced 
against  it.1  Even  where,  by  a  subsequent  curative  act,  the 
title  to  the  land  purchased  ultra  vires  became  confirmed  in 
the  association,  this  did  not  validate  a  mortgage  given  upon 
the  premises  by  the  building  association,  and  the  vendor  could 
base  no  claim  against  the  society  itself  thereon,  but  was  only 
allowed,  upon  the  equitable  doctrine  of  liens  for  purchase- 
money,  to  make  himself  paid  out  of  the  land  itself,  so  far  as 
it  would  reach.* 

Effect  upon  Corporation  of  Unlawful  Departure  from  Proper  Func- 
tions. 

§  309.  The  unlawful  departure  of  a  building  association 
from  its  proper  functions  in  purchasing  real  estate,  even  to 
the  extent  of  changing  its  character  entirely  into  that  of  a 
land  society,  will  not,  of  course,  eo  ipso,  put  an  end  to  its 
chartered  existence  as  a  building  association,  nor  relieve  its 
members  from  obedience  to  its  rules  and  performance  of  their 
duties  in  the  society.  The  case  of  Hughes  v.  Lay  ton 3  was 
decided  upon  this  point.  The  following  were  the  facts  of 
the  case  :  On  the  10th  of  May,  1852,  about  300  persons 
formed  themselves  into  a  society  intended  to  be  established 
under  the  provisions  of  the  act.  At  the  first  meeting  held 
for  the  establishment  of  the  society,  it  was  stated  that  the  ob- 
ject of  the  society  was  to  enable  those  persons  who  might 
join  it  to  procure  a  vote  for  the  county  by  obtaining  the  allot- 
ment of  a  piece  of  land.  The  respondent  (Layton)  was  not 
present  at  the  meeting,  but  he"  was  aware,  at  the  time  he 
took  shares  in  the  society,  that  one  of  its  objects  was  the 
purchase  of  land.  Rules  for  the  conduct  of  the  society  were 
prepared,  and  were  duly  certified  and  enrolled,  and  shortly 
afterwards  Layton  joined  the  society  as  an  investing  member 

ing  Association,  82  Pa.  St.  180.     As        » Ib.,  and  see  ante,  §  302. 
to  powers  of  building  associations,         s  33  L.  J.,  M.  C.  89;  10  Jur.,  N. 

incorporated  under  the  general  law  S.  513;  S.  C.,  nom.  Reg.  «.  D'Eyn- 

of  Alabama,  to  hold  real  estate,  and  court,  9  L.  T.  Rep.,  N.  S.  712;  28 

convey  the  same  (not  abridged  by  J.  P.  116;  4  Best  and  S.  820;  12  W. 

Act  1870,  p.  308)  see  Cahall  v.  Citi-  R.  408;  et  nom.  Hughes  v.  D'Eyn- 

zens*  Mutual  Building  Association,  court,  3  N.  R.  420;  116  Engl.  C.  L. 

61  Ala.  232.  Rep.  819. 

1  Faulkner's  App.,   11  W.  N.  C. 
(Pa.)  48. 


308  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  XI. 

(there  being  at  that  time  no  other  class  of  members),  by  sub- 
scribing for  two  shares,  upon  which  he  at  various  times  after 
wards  made  payments.  The  directors  of  the  society  bought 
an  estate,  which  was  conveyed  to  the  trustees  for  the  society, 
and  was  then  divided  into  allotments  amongst  such  of  the 
members  as  desired  to  have  land.  The  members  who  had  no 
allotment  made  to  them  continued  as  investing  members,  as 
contra-distinguished  from  the  other  members,  who  were  also 
allottees.  On  the  26th  of  March,  1855,  Lay  ton  became  one 
of  the  allottees  of  the  said  land,  and  signed  and  delivered  to 
the  board  a  memorandum,  of  which  the  following  is  a  copy : 
"No.  of  Register,  501.  I,  Edward  Layton,  of  12,  Upper 
Street,  Islington,  do  agree  to  take  two  allotments  of  the  so- 
ciety's land  situate  at  Enfield.  Dated  March  26,  1855.  Ed- 
ward Layton.  The  weekly  subscription  as  usual."  Layton 
was  at  thr.t  time  considerably  in  arrear  with  his  subscriptions, 
and  never  paid  any  more  after  the  date  of  the  memorandum, 
but  disputed  his  liability.  The  society,  having  borrowed  a  great 
part  of  the  purchase-money  of  the  said  land,  and  having  no 
funds  out  of  which  it  could  repay  the  sum  borrowed,  except 
the  subscriptions  in  arrear  from  Layton  and  other  allottees, 
called  upon  him  for  payment,  which  he  refused  to  make. 
Arbitrators  were  then  appointed,  who  made  an  award  order- 
ing Layton  to  pay  a  certain  sum  ;  and  on  his  neglecting  to  so 
do,  a  summons  was  taken  out  by  Hughes,  as  a  trustee,  to  en- 
force the  performance  of  the  award.  At  the  hearing  it  was 
objected  that  the  justice  had  no  jurisdiction,  on  the  ground 
that  the  society  was  not  a  society  within  the  meaning  of  the 
6  and  7  Will.  4,  C.  32,  and  that  it  had  no  power  to  buy  land, « >r 
make  its  members  contribute  to  the  purchase  thereof,  and 
that  the  said  E.  Layton  had  ceased  to  be  a  member.  The 
justice  decided  that  he  had  no  jurisdiction,  and  a  case  was 
stated  for  the  opinion  of  the  court  under  the  20  and  21  Vic., 
C.  43.  In  delivering  judgment,  Cockburn,  C.  J.,  said  :  "  I 
am  of  opinion  that  there  ought  to  be  judgment  for  the  appel- 
lant. Under  the  circumstances  of  the  case,  the  justice  ought 
to  have  issued  his  warrant  to  enforce  the  performance  of  the 
award.  The  society  was  registered  as  a  benefit  building  so- 
ciety under  the  6  and  7  Will.  4,  C.  32,  and,  by  the  rules  which 
have  been  certified,  subscriptions  and  fines  are  to  be  paid  by 


§  310.]    LEOALITr   AND   EFFECT   OF   CERTAIN   ACTS,  ETC.        3U'J 

the  members.  The  respondent  was  a  member,  and  he  has 
not  paid  his  subscriptions  or  fines.  To  the  claim  of  the  so- 
ciety for  the'payment  of  the  sums  due,  two  answers  are  made. 
First,  the  respondent  says  that  the  society  has  been  dissolved, 
and  that,  by  an  arrangement  between  the  members,  the  society 
has  been  changed  from  a  benefit  building  society  to  a  free- 
hold land  society.  If  that  be  the  case,  it  would  seem  to  be  a 
contravention  of  the  original  purpose  of  the  society,  under 
which  it  had  been  formed  in  the  first  instance ;  but,  even  if 
that  is  so,  it  does  not  follow  that  the  society  has  ceased  to 
exist.  If  there  has  been  a  misapplication  of  the  funds  con- 
tributed by  the  members,  the  proper  course  of  proceeding,  on 
the  part  of  a  member  who  thought  himself  aggrieved,  would 
be  to  apply  to  a  court  of  equity.  But  so  long  as  it  remains 
in  existence  the  members  are  bound  by  the  rules ;  the  con- 
sideration of  an  alleged  misapplication  of  the  funds  is  foreign 
to  the  jurisdiction  of  the  justice.  The  whole  question  is,  Was 
it  in  existence  ?  If  so,  the  justice  has  no  power  to  consider 
whether  the  funds  have  been  properly  applied  or  not.  That 
is  a  question  for  a  court  of  equity.  I  do  not  see  that,  because 
the  arrangement  was  made  to  purchase  land,  the  society  is 
put  an  end  to."  The  same  doctrine  has  received  incidental 
recognition  in  Pennsylvania.1 

Misuse  of  Power  in  Lending  Money. 

§  310.  A  building  association  may  also  become  guilty  of 
acts  ultra  vires  in  lending  its  money  in  a  manner  not  permit- 
ted by  law.  It  is  well  understood,  that,  whilst  the  power  to 
lend  its  money  is  at  the  very  foundation  of  a  building  asso- 
ciation's usefulness,  it  does  not  amount  to,  and  was  never  in- 
tended to  be,  a  banking  or  discounting  power  in  any  proper 
acceptation  of  the  term,"  and  its  assumption,  by  entering  into 

1  See  Miller's  Est.,  2  Pears.  (Pa.)  Ohio  St.  258;  Forest  City  United 

248.  See  also  Hoboken  Building  Land  and  Building  Association  «. 

Association  v.  Martin,  2  Beas.  (N.  Gallagher  etal.,  25  Id.  208;  Ashland 

J.)  428.  Banking  Co.  t>.  Centralia  Mutual 

9  Schober  v.  Accommodation  Sav-  Saving  Fund  Association,  9  Luz. 

ing  Fund  and  Loan  Association,  35  Leg.  Reg.  (Pa.)  41.  Order  drawn 

Pa.  St.  223;  Building  Association  v.  by  president  on  treasurer  is  not  a  ne- 

Seemiller,  3  Phila.  (Pa.)  115;  S.  C.,  gotiable  security,  but  subject,  in  any 

35  Pa.  St.  225;  State  v.  The  Oberlin  holder's  hands,  to  all  the  equities  of 

Building  and  Loan  Association,  35  the  society.  Ib. 


310  THE  LAW   OF  BUILDING  ASSOCIATIONS.         [CH.  XI. 

the  business  of  purchasing  and  discounting  notes,  where  there 
was  a  constitutional  prohibition  upon  any  corporation  at- 
tempting to  exercise  banking  powers,  except  upon  certain 
qualifications  not  acquired  by  building  associations,  was  held 
to  be  not  only  an  act  in  excess  of  its  powers,  but  in  contra- 
vention of  the  law  of  the  land,  giving  the  society,  as  the 
holder  of  a  note  so  discounted,  no  claim  upon  its  maker.1 

Nature  of  Security  to  be  Lawfully  Taken. 

§  311.  It  seems,  indeed,  to  be  the  accepted  law  in  Eng- 
land that,  "  although  the  society  may  hold  personal  estate  and 
securities  for  its  money,  yet  it  has  never  been  allowed  to  ad- 
vance the  funds  of  the  society  to  the  members  upon  personal 
security."*  No  such  strictness,  however,  seems  to  prevail  in 
this  country.  As  to  corporations  generally,  it  is  said  that  a 
provision  in  the  charter  pointing  out  the  securities  in  which 
its  funds  shall  be  invested,  is  merely  directory ;  and  that  a 
borrower  upon  different  security  cannot  claim  that  it  is  void 
on  the  ground  that  the  corporation  had  no  right  to  take  it.* 
In  Alabama  it  is  decided  that,  building  associations  being  au- 
thorized by  law  to  lend  money  to  their  shareholders  secured 
by  mortgage  on  real  estate,  on  such  terms  and  conditions  as 
may  be  prescribed  by  their  by-laws,  a  loan  is  not  ultra  vires, 
although  it  is  not  made  in  conformity  with,  or  may  be  in  di- 
rect contravention  of,  the  by-laws  of  the  association  granting 
it.4  And  it  is  said  in  New  Jersey,  that  a  building  association 

1  Manufacturers  and  Mechanics'  Bank  «.  Matthews,  98  U.  S.  627; 

Savings  and  Loan  Co.  «.  Conover,  Shewaiter  v.   Pirner,   55  Mo.  233; 

5  Phila.  (Pa.)  18.  Edwards  t>.  Fairbanks,  27  La.  Ann. 

s  Davis,  Law  of  Building,   etc.,  449,  450;  Elwell  v.  Dodge,  33  Barb. 

Societies,  p.  Ill;  cit.  R.  t>.  Scott,  13  336. 

L.  J.,  M.  C.  70;  8  Jur.  473;  S.  C.,         4  Kelly  t>.  Mobile  Building   and 

nom.  R.  v.  Shortridge,  1  New  Sess.,  Loan  Association,  64  Ala.  501  (rit. 

C.  56;  1  Do  we  and  L.  855.  Angell  and  Ames,   Corp.-,   §  362). 

3  Mutual  Life  Insurance  Co.  «.  This  was  a  case  of  ejectment,  the 

Wilcox,  7  N.  Y.  Weekly  Dig.  13.  mortgage  having  been  given  to  se- 

A  loan  made  by  a  corporation  upon  cure  the  payment  of  $2000  in  one 

security  forbidden  by  its  charter  has  year,  and  monthly  rent  of  $25  for 

been  held  to  be  enforceable  against  the   premises.    It    was    held    that 

the    borrower:     Morawetz,     Priv.  usury  was  no  defence,  a  mortgage, 

Corp.,  §  47;  cit.  Ayresc.  South  Au-  in  a  court  of  law,  being  more  than 

stralian  B.  Co.,  L.  R.,  3  P.  C.  548,  a  mere  security  for  a  debt,  and  creat- 

559,  per  Mellish,  L.  J.  -.  National  ing  a  direct  and  immediate  estate 


§  313.  J    LEGALITY   AND    EFFECT   OF   CEKTAIX    ACTS,    ETC.        3H 

has  the  right  to  invest  its  funds  upon  the  same  security  as 
would  be  taken  between  private  persons ;  so  that,  whilst  it 
may  be  the  custom  to  require  bond  and  mortgage,  and  an  as- 
signment of  stock  as  collateral,  this  is  by  no  means  obligatory, 
and  no  presumption  arises  against  the  association  where  it  is 
not  insisted  upon.1  So,  in  Pennsylvania,  the  purchasing  of 
notes,  as  a  means  of  safe  keeping  and  investment  of  the  soci- 
ety's funds,  is  not  questioned,  although  the  buying  of  them 
to  sell,  or  for  the  purpose  of  gain,  and  with  a  view  to  employ- 
ing the  proceeds  in  buying  again,  is  said  to  be  a  very  differ- 
ent thing,  wholly  outside  the  legitimate  business  of  a  building 
association.' 

§  312.  It  may  also,  when  lending  money  to  a  member,  ac- 
cept, in  addition  to  his  own  personal  security  and  assignment 
of  his  stock,  the  note  and  mortgage  of  a  third  party,  not  a 
member,  upon  his  or  her  own  real  estate,3  and  the  mortgage 
so  given  will  stand  for  the  whole  undertaking  of  the  borrower 
with  the  society,4  although  it  be  given  by  a  married  woman, 
the  wife  of  the  borrower.5 

Loans  to  Strangers  and  Persons  not  Sui  Juris.    Mortgages  of  Married 
Women. 

§  313.  It  is  said  in  Pennsylvania,'  and  in  Ohio,7  and 
seems  to  be  the  understanding  of  the  law  in  Indiana,8  in  Kan- 

in  lands, — a  fee-simple  unless  other-  *  See   Massey    v.    The    Citizens' 
wise    limited.     Welsh  v.   Phillips,  Building  and  Savings  Association  of 
54  Ala.  309.   Hence  no  defence  could  Paola,  22  Kas.  624;  Juniata  Build- 
be  made  which  could  not  be  made  ing  and  Loan  Association  v.  Mixell, 
if  the  conveyance  was  absolute — no  84  Pa.  St.  313;  Ass'n  v.  Steele,  11 
inquiry  into  the  consideration  of  the  W.  N.  C.  (Pa.)  204;  Tanner's  App., 
debt,  or  of  its  validity.    Doec.  Roll,  11  Pittsb.  Leg.  Jour.  (Pa.)  301. 
7   Ham.    Ohio,   4Q1.     A    court    of  4  Ib.    and    Relief  Saving    Fund 
equity  is  the  proper  forum  for  the  Association  v.  Longshore  ct  al.,  8 
consideration  of  all  other  questions  Luz.  Leg.  Reg.  (Pa.)  199. 
than  found  in  the  execution  of  the  *  See  cases  in  note  3. 
conveyance.     Morris  v.  Harvey,  4  *  Wolbach  v.  The  Lehigh  Build- 
Ala  300.  ing  Association.  84  Pa,  St.  211  (217), 

1  Union   Building  and  Loan  As-  and  Obiter  in  Stiles's  App.,  9  W.  N. 

sociation  of  New  Brunswick  ».  The  C.  83  (84). 

M  iM,nic  Hall  Ass'n,  2  Stew.  (N.  J.)  '  State  v.  The  Oberlin   Building 

389  (392).     See  ante,  §§  123,  126.  and  Loan  Association,  35  Ohio  St. 

8  Manufacturers   and  Mechanics'  258. 

Savings  and  Loan  Co.  v.  Conover,  5  8  Poock  et  nl.  v.  The  Lafayette 

Phila.  18.  Building  Association,  71  Ind.  357. 


312  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [CH.  XI. 

sas,1  and  in  Massachusetts,"  that  a  building  association  has 
the  power  of  lending  its  money  to  members  only,  and  not  to 
strangers.  It  must  be  admitted  that  there  is  nothing  in  the 
reason  or  constitution  of  building  associations  in  favor  of  the 
doctrine.  On  the  contrary,  although  it  undoubtedly  was  their 
design  that  eventually  all  the  members  should  become  bor- 
rowers, in  practice  there  is  always  a  large  portion  of  them 
who  content  themselves  with  paying,  and  never  think  of  draw- 
ing out.  Thus,  if  none  but  members  may  receive  loans,  the 
funds  of  the  society  may  go  begging ;  it  may  be  subjected  to 
constant  losses  on  account  of  their  lying  idle ;  and  the  very 
end  aimed  at  by  the  association,  the  speedy  and  profitable 
winding-up,  be  delayed  by  a  restraint  as  unreasonable  as  the 
license  is  harmless.8  Yet,  in  the  absence  of  special  statutory 
authority  giving  that  license,  the  doctrine  denying  it  to  build- 
ing associations  must  be  held  to  be  established  by  authority. 
In  England  it  was  long  ago  conceded  that  building  associa- 
tions had  the  right  to  make  loans  to  persons  not  members/ 
In  New  Jersey,  their  right  to  do  so  is  expressly  asserted.5  In 
Connecticut,  under  the  Act  of  1850,  the  power  of  loaning  to 
strangers,  under  certain  restrictions,  was  recognized.'  But 
in  all  of  these  instances  the  power  was  expressly  granted  by  stat- 
ute. Where  such  is  not  the  case,  the  weight  of  authority  un- 
doubtedly is  to  consider  the  loaning  of  money  to  outsiders  as 
an  unlawful  act  on  the  part  of  the  association ;  and  the  latter 
will  not  be  permitted  to  enforce  the  loan  for  more  than  the 
amount  actually  advanced,  with  legal  interest.  Such,  indeed, 
was  the  rule  laid  down  in  Connecticut.7  In  Indiana,  the 
borrower  was  not  permitted  to  defend  against  the  building 
association,  plaintiff,  upon  the  ground  that  it  had  exceeded  its 
powers  in  loaning  the  money  to  one  not  a  member.8  And  in 

1  St.   Joseph  and    Kansas  Loan  6  The  Mechanics  and   Working- 

and  Building  Association  t.  Thomp-  men's  Mut.  Sav.  Bank  and  Building 

son  et  al.,  19  Kas.  321.  Ass'n  v.  Wilcox  et  al.,  24  Conn.  159. 

*  See  Howard  Mutual  Loan  and  And  see  Same  v.  The  Meriden  Agen- 
Fund  Ass'n  t>.  Mclntire,  3  Allen,  571.  cy  Co.,  Ib.  147.     The  act  allowed 

1  See  ante,  §§  117-121.  loaning  to  strangers  where  no  mem- 

*  Cutbill  v.   Kingdom,    1  Exch.     bers  applied. 

494  (505);  17  L.  J.,  Exch.  177.  7  See  cases  in  preceding  note. 

6  Union  Build.Loan  Assn. etc.r.The         ?  Poock  et    al.  t;.  The  Lafayette 
Masonic  Hall  Assn,  2  Stew.  389  (392)     Building  Association,  71  Iiid.  357. 


§  315.]    LEGALITY   AND    EFFECT   OF   CERTAIN    ACTS,  ETC.        31S 

Pennsylvania,  the  building  association  is  allowed  to  recover 
from  a  borrower,  not  being  a  member,  the  amount  loaned, 
with  interest.1  The  same  rule  is  applied  in  Kansas." 

§  314.  The  true  theory  probably  should  be  between  the 
extremes ;  so  that,  without  denying  the  right  of  the  building 
association  to  lend  its  funds  to  outsiders,  under  any  and  all 
circumstances,  it  must  be  remembered,  (1)  that  it  can  be  per- 
mitted to  exercise  the  right  only  when  by  so  doing  no  mem- 
ber who  can  give  sufficient  security,  and  applies  for  a  loan, 
is  prejudiced  in  his  right  and  opportunity  to  receive  the 
8;uiio ; b  and  (2),  that  the  statutory  and  charter  privileges  and 
immunities  conceded  to  building  associations,  in  the  matter  of 
premiums,  interest,  and  all  payments  beyond  the  limits  of 
what  the  usury  laws  allow  in  transactions  between  other  bor- 
rowers and  lenders,  were  intended  to  apply  only  to  dealings 
between  the  association  and  its  members,  and  not  between  it 
and  outsiders.4  The  relations  between  the  association  and  its 
members  are,  by  statute,  placed  upon  a  peculiar  footing,  and 
it  cannot  be  assumed  that  a  mere  stranger  should  be  bound 
by  rules  which  govern  the  members  only  by  virtue  of  their 
membership  and  its  implied  and  express  undertakings  ;  or  by 
statutory  provisions  which  look  towards  the  government  of 
the  society's  internal  affairs  exclusively,  and  whose  favor  and 
obligations  are  intended  for  members  only. 

§  315.  Thus,  in  Connecticut,  a  joint  stock  corporation, 
authorized  by  its  charter  "  to  do  a  general  insurance  agency, 
commission  and  brokerage  business,  and  such  other  things  as 
are  incident  to,  and  necessary  in,  the  management  of  that 
business,"  in  order  to  effect  a  loan  of  a  building  association, 
subscribed  for  its  stock,  and  received  a  loan  upon  the  sunn- 
conditions  on  which  other  members,  as  one  of  which  it  was 
treated,  received  loans.  Upon  a  suit  to  foreclose  the  mort- 
gage given  to  secure  the  loan,  it  was  held,  that  the  corporation, 
whose  charter  gave  it  the  powers  above  described,  had  not 

1  Wolbach  v.  The  Lehigh  Build-  Building  Association  of  New  Haven 

iug  Association,  84  Pa.  St.  211.  t>.  Wilcox,  24  Conu.  147;  Same  «. 

9  St.  Joseph  and  Kansas  Loan  and  Merideu  Agency  Co.,  Ib.  159.  And 

Building  Association  v.  Thompson  see  ante,  g§  117-121,  and  post.  £315. 
et  al..  19  Kas.  821.  4  Ib.  and  Wolbach  v.  The  Lchiirh 

3  The  Mechanics  ami  Working-  Building  Association,  84  Pa.  St.  211 

men's  Mutual  Savrur-  Bank  and  (217). 


314  THE  LAW  OF  BUILDING   ASSOCIATIONS.         [CH.  XI. 

power  to  subscribe  to  the  stock  and  become  a  member  of  the 
building  association ;  that  such  subscription  was  void ;  and 
that,  therefore,  as  the  loan  must  be  considered  to  have  been 
made  to  a  party  who  was  not  a  member  of  the  building  asso- 
ciation, practically  at  a  rate  exceeding  the  lawful  rate  of  in- 
terest (6  per  cent.),  the  contract  was  not  protected  by  the 
laws  sanctioning  such  contracts  between  the  building  associa- 
tion and  its  members,  but  was  usurious.  The  amount  of  all 
payments  whatever  made  by  the  borrowing  corporation  to 
the  lending  corporation,  were  therefore  ordered  to  be  deducted 
from  the  sum  total  of  the  former's  apparent  indebtedness,  and 
a  decree  of  foreclosure  entered  upon  the  remainder  only.1 

§  316.  In  the  class  of  outsiders,  towards  whom  the  build- 
ing association,  as  a  lender,  and  with  reference  to  the  statutes 
of  usury,  stands  in  precisely  the  same  position  as  any  other 
corporation  or  private  person,  must  be  included  all  those  who 
are  not  sui  juris,  as  infants  and  married  women,  who,  al- 
though they  may,  in  some  States,  become  members  of  build- 
ing associations,  yet  labor  to  such  a  degree,  under  the  com- 
mon law  disability  to  contract,  as  to  be  incapable,  without 
special  authority,  to  become  bound,  by  the  terms  of  a  build- 
ing association  mortgage,  to  any  greater  extent  than  they 
would  be  bound  by  a  mortgage  given  to  a  private  person ; 
i.e.,  where  they  have,  in  general,  the  capacity  to  mortgage,  for 
principal  and  lawful  interest.  Thus,  in  Pennsylvania  (under 
the  Building  Association  Act  of  1859  and  its  supplements), 
where  a  married  woman,  capable  of  mortgaging  her  separate 
property,  but  incapable  of  contracting,  except  where  expressly 
empowered  by  statute,  and  only  to  the  precise  extent  granted 
by  such  authorization,  gave  a  mortgage  to  a  building  associa- 
tion to  secure  the  repayment  of  a  loan,  together  with  fines, 
premiums,  and  dues,  the  association  could  recover  from  her 
no  more  than  the  amount  actually  loaned,  with  legal  interest, 
and  that,  notwithstanding  the  money  received  by  her  was  ex- 
pended in  the  improvement  of  her  separate  estate.2  These 

1  The    Mechanics  and  Working-  *  Wolbach  t>.  The  Lehigh  Build- 

men's  Mutual  Savings  Bank  and  ing  Association,    84    Pa.   St.   211. 

Building  Association  of  New  Haven  See,  however,  also  Building  Asso, 

«.TheMeriden  Agency  Co.,  24  Conn,  elation  «.  Rice  and  wife,  8  W.  N. 

159 ;  and  see  Same  v.  Wilcox,  Ib.  147.  C.  (Pa.)  12. 


§  318.]    LEGALITY   AND   EFFECT   OF   CERTAIN    ACTS,    ETC.        315 

stipulations,  it  is  said,  are  distinct  and  separate  from  the  con- 
tract of  loan,  and  not,  like  other  conditions  (e.  g.,  scire  facias, 
and  failure  of  interest  clauses,  etc.),  or  waivers,  part  of  the 
authorized  mortgage  contract  itself ;  and  whilst  the  latter  bind 
the  married  woman,1  the  former  do  not. 

§  317.  But  if  a  married  woman  does  not  set  up  her  cover- 
ture as  a  defence  to  the  premiums  contracted  for,  her  next  of 
kin,  after  her  death,  cannot  be  permitted  to  do  so.a  And 
where  a  woman  was  the  owner  of  shares  in  a  building  associa- 
tion, and  upon  a  joint  judgment  of  her  and  her  husband 
(which  was,  in  law,  only  the  latter' s),  a  loan  was  made  by  the 
building  association  to  the  husband,  the  money  passing  di- 
rectly into  his  hands ;  his  appeal  from  a  decree  refusing  to 
open  the  judgment  was  dismissed,  on  the  ground  that  the 
contract,  though  invalid  as  to  her,  was  perfectly  valid  as  to 
the  husband,  who  alone  was  before  the  court  asking  for  relief 
against  its  enforcements.3 

§  318.  On  the  other  hand,  if  a  married  woman,  being  ca- 
pable of  giving  a  mortgage  upon  her  separate  property  to 
secure  her  husband's  debts,  unites  in  executing  such  an  one  to 
secure  a  loan  which  her  husband,  as  a  stockholder,  procured 
from  a  building  association,  it  was  held  to  be  a  valid  mort- 
gage upon  her  separate  property,  covering  premiums,  fines, 
and  dues.4  The  question  here  is  a  very  simple  one,  and  the 
distinction  obvious.  The  woman  is  capable  of  giving  a  mort- 
gage to  secure  her  husband's  debts,  whatever  they  may  be.  He 
is  free  to  contract  for  the  payment  of  fines  and  premiums. 
What,  then,  is  his  debt  ?  If  he  is  liable  (as  he  is)  for  the 
whole  sum  stipulated  in  the  mortgage,  and  fines,  and  pre- 

1  See  Miner  v.  Graham,  12  Har-  But  the  fact  of  a  wife's  joining  with 

ris  (Pa.),  491 ;  Glass  0.  Warwick,  4  her  husband  in  a  mortgage  upon  his 

Wright,  140;  Patterson  v.  Robin-  lands  to  secure  overdue  notes,  when, 

son,  1  Cas.  82;  Black  v.  Galway,  12  by  assignment  she  held  a  prior  m< >rt- 

Harris,  18.  gage  covering  the  undivided  0110- 

*  Kingsessing  Building  Associa-  half  of  a  co-tenant's  intercut  in  the 

tion  v.  Roan,  9  W.  N.  C.  (Pa.)  15.  same  lands,  does  not  subordinate 

3  Tanner's  Appeal,  11  Pittsburgh  the  mortgage  she  holds  as  assignee 
Leg.  Jour.  (Pa.)  301.  to  that  in  which  she  joined  with  her 

4  Juniata  Building  and  Loan  As-  husband.     She  conveys  IIRT.  ly  her 
sociation     r.     Mixell.    84    Pa.    St.  inchoate  right  of  dower.     Hudson 
313.     Sec  also  Association  r.  Steele,  City  Savings  Institute  r.  McAitlmt 
51  \V.  X    0.  (P:i.)  304;  ante,  £  71.  «-t  al..  8  N.  Y.  Weekly  Dig.  63. 


316  THE  LAW  OF  BUILDING   ASSOCIATIONS.         [CH.  XI. 

miurns,  or  for  dues  and  contributions  of  any  kind  secured  by 
his  obligation,  the  wife's  mortgage  stands  for  them  all.1 

Loans  to  Other  Corporations. 

§  319.  A  further  question  arises  as  to  the  right  of  a  build- 
iiiir  association  to  advance  money  to  another  corporation. 
When  this  is  done  by  way  of  mere  deposit  in  a  bank,  there 
can  be  no  impropriety  in  it.  But  a  case"  arose  in  1870,  in 
England,  in  which  it  appeared  that  the  directors  of  a  building 
association  had  deposited  money  with  a  finance  company,  the 
bank  for  the  regular  deposit  of  funds  being  named  in  the 
rules.  The  finance  company  was  incorporated,  among  other 
things,  for  the  raising  and  borrowing  money  at  interest,  and 
receiving  deposits.  The  manager  of  the  latter  was  also  the 
manager  of  the  building  association.  The  finance  company, 
however,  not  being  a  banking  company,  no  checks  were 
drawn  on  it;  but  when  a  deposit  was  to  be  withdrawn,  two 
of  its  directors  drew  a  check  upon  its  bankers  in  favor  of  the 
depositor  for  the  amount  withdrawn.  Such  a  check,  upon 
the  representation  of  the  manager  that  the  directors  of  the 
building  association  had  required  repayment,  was  drawn  in 
favor  of  the  building  association,  countersigned  by  the  man- 
ager of  the  finance  company  (who  was  also  the  manager  of  the 
building  association),  and  was  then  given  into  his  possession. 
It  was  cashed  by  the  bank,  but  the  proceeds  never  paid  to  the 
building  association's  directors.  Shortly  afterwards  the  man- 
ager died,  and  his  estate,  being  insolvent,  the  building  associa- 
tion was  unable  to  recover  the  amount.  It  then,  by  bill  in 
equity,  asked  the  court  to  direct  the  finance  company  to 
make  good  the  amount,  alleging  that  the  deposit  of  the  so- 
ciety's money  with  the  defendants  was  unauthorized  and  ille- 
gal, and  that  the  defendants  had  notice  of  such  illegality ; 
that  the  repayment  to  the  manager  was  without  any  authority 
from  the  directors  of  the  building  association,  and  without 

1  It  seems  that  an  executor,  where  J.,  Ch.  317;  20  W.  R.  354;  26  L.  T., 

he  can  mortgage  at  all  generally,  N.  S.  121. 

may  equally  effect  a  mortgage  with  s   Hardy    t.    Metropolitan    Land 

power  of  sale  and  all  the  incidents  and  Finance  Co.,  Law  Rep.,  7  Ch. 

of  a  building  association  mortgage  App.  427;  S.  C.,  41  L.  J.,  Ch.  237;  26 

on  advanced    shares      Cruikshank  L.  T.  Rep.,  N.S.  407;  20  W.  R.  425; 

v.  Duffln,  L.  R.  13  Eq.  555;  41  L.  (reversing  S.  C.,  L.  11.  12  Eq.  386.) 


§  320.]    LEGALITY   AND   EFFECT  OF  CERTAIN   ACTS,  ETC.        317 

taking  a  proper  receipt.  The  defendants,  in  their  answer, 
alleged  that  they  had  no  notice  that  the  building  association 
had  no  power  so  to  invest  its  moneys ;  that,  if  it  were  so,  it 
followed  that  the  society  had  also  full  notice  of  the  fact  of 
that  investment,  as  some  of  the  directors  in  the  finance  com- 
pany were  also  directors  of  the  building  association ;  and  that 
they  had  duly  repaid  the  deposit  by  the  check  given  to  the 
manager.  It  was  held  that  the  building  association's  direc- 
tors had  been  guilty  of  a  breach  of  trust  in  the  depositing 
the  money  with  the  defendants,  since,  if  it  was  to  be  perma- 
nently invested,  it  must  be  placed  upon  certain  securities 
only,  and  if  to  be  kept  for  immediate  use,  it  must  be  de- 
posited in  the  bank  indicated  by  the  rules ;  that  the  payment 
to  the  manager  was  not  a  payment  to  the  building  association, 
as  was  shown  by  the  course  of  business,  and  that  the  building 
association's  demand  from  his  personal  representatives  did  not 
prove  it  to  have  been  such ;  and  that,  therefore,  the  money 
having  come  into  the  defendants'  hands  by  a  breach  of  trust, 
and  being  still  in  their  hands,  they  must  now  refund  it  (with 
interest),  and  it  could  not  be  treated  as  a  mere  money  demand 
to  be  sued  out  at  law.  It  had  also  been  previously  deter- 
mined that  a  building  association  had  no  power  to  invest  its 
funds  with  another  building  association,  and  that  money  bor- 
rowed by  one  to  be  lent  to  another  constituted  no  debt  which 
could  be  enforced  against  the  former.1 

§  320.  It  can  scarcely  be  said  that  these  decisions  furnish 
an  universally  applicable  guide  to  the  solution  of  the  question. 
In  this  country  it  has  received  no  distinct  adjudication.  There 
was  a  case  in  New  Jersey,8  in  which  a  Masonic  hall  associa- 
tion had  subscribed  for  stock  in  a  building  association,  and 
received  a  loan  from  it,  and  the  debt  was  enforced.  But  this 
question  was  not  expressly  presented,  and  the  decision  of  the 
court  touched  only  upon  other  issues  raised  before  it.  Tin- re 
was  another  case,  in  Connecticut,'  where  a  building  associa- 

1  In  re  Durham   County  Perma-  *  Union  Building   Loan  Associa- 

nent,  etc.,  Society,  AVilson's  Case,  tion  of  New  Brunswick  r.  Tin-  Ma- 

25  L.  T.  Rep.,  N.  S.  83;  Law  Rep.,  sonic  Hall  Association,  etc.,  2  Stew. 

12  Eq.  516.    The  Act  37  and 38  Vic.,  (N.  J.)  389. 

C.  42,  allows  a  terminating  society  $  Mechanics    and   Workingmen's 

to  invest  with  another  society,  but  Mutuiil  Savings  Bank  and  Building 

goes  no  further.  A  —  x-ia'ion  of  New  Haven  v.  The 


318  THE   LAW   OF   BUILDING   ASSOCIATIONS.          [CH.  XI. 

tion  attempted  to  enforce  a  note  secured  by  mortgage  given 
it  by  a  corporation  chartered  "  to  do  general  insurance  agency, 
commission  and  brokerage  business,  and  such  other  things  as 
are  incidental  to,  and  necessary  in,  the  management  of  that 
business;"  and  which  had  subscribed  to  the  stock  of  the 
building  association,  and  received  a  loan  under  reservation  of 
premium,  etc.  It  was,  however,  held  that  the  agency  com- 
pany had  acted  ultra  vires  in  subscribing  for  the  stock,  and 
the  subscription  was  void ;  that  the  loan  was,  therefore,  not  a 
loan  to  a  member,  and  that  the  building  association  might 
only  recover  what  it  had  actually  loaned  the  corporation, 
with  legal  interest. 

§  321.  It  certainly  does  not  appear  to  be  consistent  with 
the  purposes  of  a  building  association's  being,  nor  in  any  wise 
related  to  the  policy  which  justifies  the  creation  of  these  in- 
stitutions with  the  extraordinary  powers  they  possess,  to  have 
its  membership  in  part  composed  of  corporations,  and  there 
can  be  little  doubt  that  the  statutes  never  contemplated  such 
a  departure.1  But,  dismissing  the  question  of  membership, 
and  looking  at  the  transaction  as  one  between  the  association 
and  a  stranger,  there  appears  to  be  no  reason  for  denying  the 
right  of  a  building  association  to  lend  money  to  another  cor- 
poration, under  the  same  restrictions  which  were  indicated  in 
the  case  of  loans  to  strangers.8  As  for  any  power  to  invest 
their  funds  in  the  purchase  of  and  speculation  in  stocks  and 
bonds  of  any  other  corporation  whatever,  none  such  has  ever 
been  conceded  to  building  associations,  and  the  act  would  be 
clearly  a  misapplication  of  its  funds. 

Power  to  Reserve  Interest. 

§  322.  The  taking  of  interest  is  so  much  the  ordinary  in- 
cident to  a  loan,  that  the  authority  to  lend  implies  that  of 
reserving  lawful  interest  on  the  loan,  and  it  is,  therefore,  not 
ultra  vires  of  building  associations  to  reserve  interest  upon 
the  loans  they  are  capacitated  to  make.* 

Meriden    Agency    Co.,    24  Conn.         3  City  Building  and  Loan  Co.  v. 

159.  Fatty,  1  Abb.  App.  Dec.  (N.  Y.) 

1  See  ante,  §§  117-121.  347.  But  see  post,  Ch.  xii.,  and 

*  See  ante,  §§  313-316.  Maryland  cases  there  collected. 


§  3*3.]    LEGALITY   AND   EFFECT  OF   CERTAIN   ACTS,    ETC.        319 

Power  to  Compromise  with  Members. 

§  323.  Nor  doe8  it  appear  to  be  an  improper  exercise  of 
the  building  association's  power,  to  compromise  with  its 
members,  investors  as  well  as  borrowers,  upon  fair  and  equita- 
ble principles,  and  in  good  faith,  both  as  to  the  interest  of 
the  stockholders  and  of  the  public,  and  thereupon  to  release 
them  from  further  obligation  to  the  society.  A  building  as- 
sociation was  brought  into  court  upon  quo  warranto  on  the  fol- 
lowing charges  of  abuse  of  its  charter :  (1)  It  had  refused  to 
make  loans  to  members ;  (2)  it  had  established  a  minimum 
premium,  giving  the  directors  power  to  vary  and  n'x  it,  from 
time  to  time,  below  which  bids  by  members  were  refused ;  (3) 
it  had  ordained  distribution  or  dividends  of  cash  and  securi- 
ties to  be  made  to  unadvanced  shareholders,  amounting,  in 
the  aggregate,  to  $10,296  ;  (4)  it  had  borrowed  money  on  notes 
from  a  bank,  for  the  purpose  of  making  loans  to  member:-. 
and  for  purchasing  stock  held  by  members,  so  as  to  transfer 
it  to  persons  not  members,  who  desired  to  obtain  loans  from 
the  association ;  (5)  it  had  permitted  some  members  to  hold 
more  than  the  legal  maximum  of  shares,  and  issued  loans 
thereon ;  (6)  it  had,  on  several  occasions,  compromised  with 
members,  who  then  sold  their  shares  to  the  association,  and 
were  released  by  it  from  all  further  obligations  towards  it. 
Every  one  of  these  transactions  was  by  the  court  declared 
illegal  and  an  abuse  of  power,  except  the  last.  Of  this  the 
court  says:  "The  association  compromised  with  several  of  its 
members,  and  released  them  from  further  obligation  to  the 
corporation,  as  well  on  account  of  indebtedness  for  loans,  as 
on  subscriptions.  We  have  examined  the  evidence,  and  wi- 
de not  find  there  was  any  want  of  good  faith  in  these-  transit: 
tions.  The  interest  of  the  stockholders,  as  well  as  the  public, 
seems  to  have  been  kept  in  view.  Of  course,  without  this. 
such  acts  could  not  be  upheld  ;  but  we  are  not  able  to  iiml  in 
the  statute  any  inhibition  of  the  power  to  make  such  coin 
promises,  and,  on  fullest  consideration,  we  unite  in  holding 
that  the  power  exists."  The  judgment  of  the  court,  accord- 
ingly, was,  that  the  corporation  be  ousted  from  the  exercise 
of  the  powers  referring  to  the  refusal  of  loans  to  its  members ; 
of  establishing  rules  and  regulations,  or  so  conducting  its  busi- 
ness as  to  prevent  the  loan  of  its  funds  to  a  member  who  bids 


320  THE   LAW   OF  BUILDING   ASSOCIATIONS.  [CH.  II. 

the  highest  premium  therefor ;  to  borrow  money  for  the  pur- 
pose of  lending  it ;  to  divide  or  distribute  its  funds  among 
members  in  advance  of  the  distribution  at  the  winding-up  <>f 
the  corporation  ;'  to  traffic  in  shares  of  its  own  stock ;  and  to 
permit  any  member  to  hold  in  his  own  right  more  than  the 
legal  maximum  of  shares :  but  not  from  the  power  of  com- 
promising, in  good  faith  and  reasonably,  with  a  member, 
and  releasing  him  from  further  obligation  to  the  corpo- 
ration, whether  the  indebtedness  be  for  a  loan,  or  on  sub- 
scription.3 

Declaring  Dividends. 

§  32-t.  In  the  absence  of  express  statutory  authorization  to 
declare  and  pay  dividends  out  of  the  profits  of  the  society's 
business,  either  annually  or  otherwise,  no  such  power  exists  in 
building  associations.  As  to  any  participation  in  profits,  the 
scheme  has  reference  to  the  final  adjustment  of  accounts,  not 
to  any  intermediate  realizations.3 

Liability  to  State  for  Unlawful  Departure  from  Powers  Granted. 

§  325.  As  to  the  corporate  existence  of  the  building  asso- 
ciation, as  affected  by  the  departures  above  considered  (and 
of  all  others  of  which  it  may  become  guilty),  from  its  pre- 
scribed and  legitimate  course  of  business ;  it  is  not  determined, 
eo  ipso facto,  simply  by  reason  of  their  occurrence,  but  they 
render  the  association  liable  to  the  interference  of  the  State 
for  the  purpose  of  depriving  it  of  the  franchises,  with  which 
it  has  shown  itself  unfit  to  be  entrusted.4  And,  upon  such 
direct  proceeding  to  enforce  against  the  society  the  forfeiture 
of  its  charter,  every  step  on  the  unlawful  path  becomes  nn 
aggravating  element,  to  be  weighed  by  the  court  in  pronounc- 

1  Such   periodical   dividends  are  Association,  29  Ohio  St.  92.     And 

permitted  in  some  of  the  States  by  the  mere  disadvantageousness  of  a 

statute.  bargain  is  not  ordinarily  a  ground 

s  State  v.  The  Oberlin  Building  for  setting  it  aside.     Jeffries  c.  In- 

and  Loan  Association,  35  Ohio  St.  surance  Co.,  22  Wall.  (U.  S.)47,  and 

258;  (Gilmore,  C.  J.,  dissenting  be-  ante,  §§  169-170. 

cause,  in  his  opinion,  the  violations  3  See  State  v.  The  Oberlin  Build- 

of  its  charter  by  the  building  asso-  ing  and  Loan  Association,  35  Ohio 

ciation  had  been  such  as  should  be  St.  258. 

punished     with    total    forfeiture).  4  See  post,  §§  479-481,  504 
See  also  States.  Greenville  Building 


§326.]          LOANS   OR   ADVANCEMENTS   TO    MEMBERS.  321 

ing  its  sentence.  But  it  is  said,  that  where  a  corporation  has 
abused,  or  misused,  its  corporate  power,  but  not  in  any  par- 
ticular as  to  which  it  is  declared  by  statute  the  act  shall  op- 
erate as  a  forfeiture  of  its  charter,  the  court  is  vested  with  a 
discretion  to  determine  whether  the  corporation  shall  be 
ousted  of  its  franchise  to  be  a  corporation,  or  merely  from 
the  exercise  of  the  powers  illegally  assumed.1 


CHAPTER  XII. 

LOANS    OK   ADVANCEMENTS   TO   MEMBERS. 

§  326.  Analysis  of  the  transaction  and  contract  of  loan  or  advancement 

between  society  and  borrowing  member. 
§  328.  Interpretation  by  the  various  courts  of  the  nature  of  loans  or 

advancements  in  building  associations. 
§  338.  Decisions  in  England. 
§  339.  Decisions  in  Maryland. 
§  340.  Decisions  in  Kansas. 
§  341.  Decisions  in  Massachusetts. 
§  342.  Decisions  in  New  Jersey. 

§  343.  Decisions  in  Virginia  (and  District  of  Columbia). 
§  344.  Decisions  in  New  Hampshire. 
§  345.  Decisions  in  New  York. 
£  346.  Decisions  in  Georgia. 

§  347.  Decisions  in  North  Carolina  (and  South  Carolina). 
£  348.  Decisions  in  Nebraska. 
§  349.  Decisions  in  Tennessee. 
£  350.  Decisions  in  Kentucky. 
g  351.  Decisions  in  Pennsylvania. 
§  352.  Decisions  in  Indiana. 
§  353.  Decisions  in  Connecticut,  Iowa,  Ohio. 
!.   Result  of  examination  of  all  decisions. 
;:  :!57.   Two  cardinal  principles  concerning  loans  and  borrowers. 

Analysis  of  the  Transaction  and  Contract  of  Loan  or  Advancement 
Between  Society  and  Borrowing  Member. 

§  32G.  The  peculiar  principles  of  the  building  asso- 
ciation scheme  are  fully  developed  in  the  transaction  of 
loan  or  advancement  between  the  association  and  its  mein- 

1  State  t>.  The  Oberlin  Building     258:   State  r.    Greenville  Building 
and  Loan  Association,  35  Ohio  St.      Association.  29  Id.  92. 


322  THE   LAW   OF  BUILDING   ASSOCIATION'S.        [CII.  XII. 


It  is  a  matter  of  no  slight  difficulty,  to  convey  an  exact 
Appreciation  of  the  elements  which  enter  into  this  transaction 
in  their  relation  to  one  another,  and  so  to  penetrate  and  anal 
yze  its  complicated  nature,  as  to  present,  at  once,  all  its  divers 
phases  in  a  homogeneous  and  consistent  aspect.  It  i.-  DOOM 
.sary,  in  order  to  accomplish  this  purpose,  to  exclude,  from 
the  outset,  the  consideration  of  all  contracts  which  do  not 
partake  of  the  distinctive  properties  of  the  building  associa- 
tion loan,  in  its  legitimate  character,  keeping  in  view  its 
legitimate  results.  This  transaction  is  made  up  of  the 
following  essential  parts  :  —  (1)  A  member  holding  a  certain 
interest  in  the  ultimate  achievements  of  the  association, 
conditioned  upon  his  fulfilment  of  the  duties  of  his  mem- 
bership, may,  instead  of  waiting  for  the  realization  of 
liis  prospects  upon  final  settlement,  anticipate  their  contem- 
plated result  by  obtaining  from  the  society  an  advance  bear- 
ing a  certain  proportion  to  the  same  ;  (2)  in  consideration  of 
the  preference  thus  accorded  him  over  his  fellows,  the  require- 
ments of  strict  mutuality  constrain  him  to  yield  to  the  society 
a  return,  in  the  shape  of  a  sum  of  money,  premium,  or 
bonus,  which  he  agrees  to  pay  it,  not  only  commensurate 
with  the  advantage  he  has  from  the  accommodation,  but  also, 
being  a  contribution  to  the  common  treasure  of  the  associa- 
tion, designed  to  be,  in  a  measure,  an  indemnification  to 
others  who  have  been  postponed  to  him  in  the  competition 
for  such  preference,  in  which  his  peculiar  circumstances  and 
necessities  have  justified  him  in  overbidding  them  ;  (3)  he 
accepts  a  liability  to  reimburse  the  association  for  the  outlay 
it  has  made  in  his  favor,  for  the  measure  of  which  reimburse- 
ment the  business  affairs  of  men  furnish  only  a  single  univer- 
sally just  and  adequate  basis,  that  of  principle  and  interest. 
But  the  manner  and  method  in  which  this  obligation  is 
intended  to  be  discharged  is  the  crucial  test  of  the  system, 
and  the  criterion  of  the  legitimacy  of  the  transaction. 

§  327.  It  is  perfectly  manifest,  that,  if  a  person,  receiving 

1  For  the  manner  and  formal!  Lies  as  in  popular  speech,  no  significance 

of  obtaining  loans,  see  ante,  §§  42-  being  attached  to  the  one  distin- 

43.     The  words  "loan"  and  "ad-  guishing  it,  in    legal   effect,  from 

vance,"  and  their  derivatives,  are  the  other,  unless  expressly  pointed 

rised  interchangeably  in  this  work,  out. 


§  328.]          LOANS   OR    ADVANCEMENTS   TO    MEMBERS.  323 

an  advance  of,  say,  $750,  were  to  give  another  a  bond  for 
$1000,  payable  in  one,  three,  or  ten  years,  with  interest,  he 
would  have  little  reason  to  be  gratified  with  his  bargain, 
whether  the  interpretation  put  upon  it  obliged  him  to  pay 
interest  on  $750  or  on  $1000,'  and  whether  he  was  to  be  per- 
mitted to  repay  that  sum  in  installments,  or  only  in  a  lump. 
This  would  be  nothing  more  nor  less  than  a  loan  at  usury, 
which  could  in  no  wise  recommend  itself  to  the  conscience  of 
a  court,  or  to  the  policy  or  intelligence  of  a  sanctioning  legis- 
lature. Still  less  attractive  would  it  appear,  if  the  bond 
imperatively  called  for  regular  monthly  partial  payments,  to 
be  enforced  by  fines  and  forfeitures,  at  the  same  time  stip- 
ulating that  the  interest,  also  to  be  paid  monthly,  should, 
until  the  entire  $1000  were  made  up,  never  decrease  in 
amount,  but  at  all  times  be  the  lawful  rate  per  annum  upon 
$750  or  $1000,  as  the  case  might  be.  Such,  therefore,  can- 
not be  the  nature  of  a  building  association  loan ;  yet  such, 
viewing  it  merely  as  a  loan,  unquestionably  are  its  features. 
The  conclusion  is  thus  forced  upon  the  mind,  that  it  will  not 
do,  to  consider  the  advancement  of  the  building  association  to 
its  borrowing  member  in  the  light  of  a  loan,  pure  and  simple, 
but  that  there  must  be  something  in  the  transaction,  its  inten- 
tion and  essential  nature,  as  well  as  its  practical  workings, 
which  lifts  it  beyond  the  pale  of  mere  usurious  lending. 
This  element  is  found  in  the  manner  and  method  of  reim- 
bursement, although  it  unquestionably  proceeds  upon  the 
basis  of  principal  and  interest. 

§  328.  As  to  the  repayment  of  the  principal,  the  design  is 
most  simple.  The  member,  bound  by  his  original  contract 
with  the  association  to  make  stated  periodical  payments  of 
fixed  amounts,  strengthens  his  undertaking,  to  the  greater 
security  of  the  association  which  has  parted  with  its  funds  to 
him,  and  may  well,  as  a  condition  of  so  doing,  require  him  to 
give  substantial  assurance  of  his  faithful  intentions  as  to  the 
discharge  of  his  membership  duties,  by  mortgaging  his  prop- 
erty to  it  as  a  pledge  for  such  discharge,  to  the  end  of  the 
society's  existence,  and,  in  case  of  his  neglect,  notwithstand- 
ing, for  the  enforcement  of  the  same,  as  well  as  of  all  arrearages 
and  fines  properly  charged  against  him.  The  society  being 
1  In  some  States  interest  on  premiums  bid  is  allowed. 


324  THE   LAW   OF  BUILDING   ASSOCIATIONS.       [CH.  XII. 

thus  re-assured,  the  member,  mindful  of  the  impossibility  of 
evasion,  continues  to  pay  his  regular  dues.  These,  together 
with  all  similar  payments  made  by  other  members,  and 
together  with  all  the  revenues,  from  whatever  source,  flowing 
into  the  society's  coffers,  are  added  to  the  common  treasury, 
and  again  made  the  means  of  securing  new  profits,  until  the 
period  arrives  when  the  association  is  ready  to  wind-up.  The 
shares,  his  own  interest  in  the  society's  accumulations,  have 
now  reached  their  contemplated  value.  But  the  borrower 
has  anticipated  that  result,  and  in  so  doing  has  given  the  asso- 
ciation the  right  to  make  itself  whole,  to  reimburse  itself,  not 
only  for  what  it  has  given  him,  but  also  for  what  he  has 
agreed  to  add  to  that  amount  by  way  of  premium  offered,  out 
of  the  sum  standing  to  his  credit  as  a  member  of  the  society. 
That  sum  is  necessarily  the  amount  he  has  received,  plus  the 
premium  he  has  bid.  The  society  appropriates  this,  and  the 
principal  is  repaid. 

§  329.  There  remains  the  matter  of  the  interest.  Small 
and  frequent  contributions  are  the  life  and  blood  of  the  build- 
ing association.  They  are  also  less  irksome  and  far  easier  to 
persons  in  small  circumstances  than  large  payments  at  greater 
intervals.  The  interest  is,  therefore,  payable  monthly,  like 
the  subscriptions,  and,  like  them,  its  discharge  is  secured  by 
the  borrower's  mortgage.  As  the  interest  from  any  borrower 
comes  in,  it  is  added  to  the  common  fund,  swelling  his  own 
share  in  it  not  only  by  a  proportionate  part  of  its  own  size, 
but  also  of  the  profits  which  its  re-investment  may  secure.  It 
is  clear,  however,  that,  as  no  reckoning  or  adjustment  of  ac- 
counts can  take  place  between  the  society  and  the  borrower, 
previously  to  the  final  one,  when  the  society  is  wound  up,1 
and  as  he  gets  the  full  benefit  of  every  contribution  he  makes, 
not  only  in  the  increased  value  it  adds  to  his  interest  in  the 
common  fund,  but  also  in  his  share  of  the  profits  made  upon 
its  investment, — the  amount  of  interest  which  he  has  to  pay 
does  not  vary  from  the  beginning  to  the  end.  Each  contri- 
bution is  not  applied  to  his  debt  as  it  comes  in ;  it  is  the  final 
amount,  ascertained,  upon  winding  up,  to  have  accumulated 
upon  his  shares,  which  is  then  applied  in  extinguishment  of 

1  See  ante,  §§  128-129. 


§  331.]          LOANS   OR  ADVANCEMENTS  TO   MEMBERS.  325 

the  principal.1  Until  that  period  arrives  the  latter  remains 
unchanged,  and  unchanged,  of  course,  the  interest  upon  it. 
Both  cease  at  the  same  time. 

§  330.  These  are  the  essential  elements  of  a  building  asso- 
ciation loan,  and  where  they  are  not  found,  the  contract  does 
not  properly  come  under  that  description.  Thus,  if  the 
building  association  were  to  make  a  loan  to  a  stranger,  or  to  a 
member,  upon  terms  which  excluded  him  from  participating 
in  the  advantages  resulting  from  the  mutual  system,  in  which 
outlay  and  return  are  so  intimately  blended  as  to' be  in  fact 
inseparable ;  if  the  contract  were  that  of  mere  loan,  looking 
towards  the  repayment,  dollar  for  dollar,  of  the  sum  loaned, 
and  the  discharge  of  interest  in  the  meanwhile,  this  would 
not  constitute  a  building  association  loan,  and  the  reservation 
of  a  premium  would  be  merely  usury,  whether  sanctioned  by 
statute  or  not.  But  it  is  not,  therefore,  indispensable,  that 
the  security  given  by  a  member  to  his  association  should  stip- 
ulate only  for  the  performance  of  membership  duties  and  the 
payment  of  interest.  It  may  be  given  for  a  specific  sum,  or 
principal,  to  be  returned  at  a  specified  time,  if  it  is,  neverthe- 
less, clearly  shown,  in  the  bond  or  mortgage,  that,  whatever 
may  be  its  formal  phraseology,  the  discharge  of  the  debt  is 
designed  to  be  according  to  the  system  and  principle  peculiar 
to  building  associations. 

§  331.  As  to  the  stipulation  for  the  return  of  the  loan, 
naming  a  specific  sum,  such,  in  fact,  is  the  effect  of  every 
building  association  mortgage.  And  one  which  calls  for  it  in 
express  terms,  does  nothing  which  is  not  equally  done  in  a  mort- 
gage which  calls  for  the  continued  payment  of  dues  during  the 
association's  existence.  These  payments  (of  dues)  must,  accord- 
ing to  calculation,  eventually  be  equal,  or  make  the  borrower' s 
share,  in  value,  equal,  to  the  sum  actually  loaned  and  the 
premium  bid.  This,  then,  is  to  be  given  to  the  association, 
and  a  mortgage  which  calls  for  a  specific  sum  to  be  returned, 
really  asks  nothing  more ;  for  that  sum  will  be  realized  when 
the  shares  are  at  par,  and  in  either  case  that  par  value  goes 
to  satisfy  the  mortgage.  It  is  a  distinction  in  words  only,  to 
say,  that  in  the  one  case  there  is  no  money  to  be  returned, 

1  See  Barker  v.  Bigelow,  15  Gray     ton,  etc..  Association,  pros.,  t.  Horn- 
(Mass.),  130  (137);  State,  Washing-     backer,  13  Vr.  (N.  J.)  635.  ' 


326  THE   LAW  OF  BUILDIXO   ASSOCIATIONS.       fCH.  XII. 

whilst  in  the  other  there  is ;  that  the  latter  stipulates  for  pay- 
ment of  principal  and  interest,  whilst,  in  the  former,  these 
features  are  not  an  element  in  the  transaction,  the  only  debt 
the  member  guarantees  in  his  mortgage  being  his  obligation 
to  pay  dues,  and  to  be  a  faithful  member,  to  the  end  of  the 
society's  life.  The  fact  that  the  society  must  be  made  whole, 
is  acknowledged  upon  either  theory,  and  it  makes  no  practi- 
cal difference  in  this  particular,  whether  the  transaction  is 
treated  as  one  in  which  money  has  been  advanced  and  must 
be  repaid  out  of  the  final  accumulation  ;  or  whether,  to  save 
consistency,  the  same  end  be  accomplished  by  proclaiming 
that  an  advanced  member  has  no  interest  in  the  final  distribu- 
tion. Yet  the  latter  is  a  theory,  the  handling  of  which  is  not 
only  a  most  delicate  matter,  but  which,  logically,  results  in 
the  most  confusing  inconsistencies  and  palpable  error.1  There 
is,  indeed,  a  purpose  of  convenience  to  be  served  by  making 
a  definite  sum  repayable,  the  advantage  of  which  is  apparent, 
where  it  is  desired  to  repay  a  loan  before  its  maturity,  or 
where  it  becomes  necessary  to  enforce  such  payment  from  a 
delinquent  borrower.  In  such  cases,  instead  of  being  obliged 
to  resort  to  intricate  and  uncertain  calculations,  as  to  the 
probable  duration  of  the  society,  during  which  dues  may  yet 
become  payable  by  the  member,  there  is  afforded  a  plain  and 
unmistakable  basis,  in  the  figure  of  the  mortgage,  from  which 
it  only  remains  to  deduct  the  stock-payments  (less  his  share  of 
expenses,  etc.)  which  the  member  wishes  to  apply  to  the  liqui- 
dation of  his  debt. 

§  332.  As  to  the  stipulation  for  the  return  of  the  loan, 
naming  a  specific  time  when  the  debt  shall  be  due,  it  has 
probably  never  been  pretended  that  a  building  association, 
taking  a  mortgage  from  one  of  its  members  for  a  specific 
sum  (being,  in  fact,  the  amount  received,  plus  the  premium 
bid  by  him,  or  the  former  only),  and  contracting  for  the  repay- 
ment of  the  same,  with  interest,  in  one  year,  or  any  number 
of  years  within  the  lifetime  of  the  association,  would  have 
the  right,  upon  the  expiration  of  the  period  named,  and  with- 
out any  default  on  the  part  of  the  mortgagor,  to  demand 
from  him  the  face  value  of  the  mortgage,  even  allowing  him 

1  See  ante,  §§  146-148. 


§332.]         LOANS  OR  ADVANCEMENTS  TO   MEMBERS.  32? 

to  deduct  the  aggregate  amount  of  his  stock-payments.  Such 
is  not  the  purpose  intended  to  be  served  by  building  associa- 
tion loans.  A  long  time  to  repay,  and  small  payments  fre- 
quently repeated,  are  among  the  principal  recommendations 
of  this  system,  and  a  contract  which  contemplates  anything 
else  is  not  properly  to  be  classed  as  a  building  association 
loan.  Yet  mortgages  written  for  one  year  are  not  neces- 
sarily improper,  unless  intended  to  be  enforced,  at  all  events, 
fctrictly  according  to  such  limitations.  By  such  arrangement, 
even  independently  of  statutory  power  given,  the  borrower's 
right  to  repay  is  fixed  beyond  question,  as  also  that  of  the 
society  to  recover  in  case  of  default;  and  it  seems  the  court 
will  treat  such  mortgages  as  not  intended  to  be  recoverable 
during  the  building  association's  continuance  except  upon 
default  in  stock-payments,  etc.1  In  one  of  the  earliest  Eng- 
lish cases,  the  note  given  by  the  borrowing  member  to  the 
society  was  payable  on  demand,  the  agreement  of  forbearance 
and  stock-payments  being  an  outside  and  additional  arrange- 
ment.2 Certainly  a  building  association  may,  with  perfect 
propriety,  make  loans  to  its  members,  with  all  the  incidents- 
of  true  building  association  loans,  fixing  the  probable  period 
of  the.  dissolution  of  the  society  as  that  of  the  maturity  of 
the  debt.  In  adding  this  provision  to  the  insertion  of  a 
stipulated  amount,  loaned  and  returnable,  there  is,  again, 
nothing  added  to  the  substance  of  the  contract  looking 
merely  towards  the  payment  of  dues,  etc.,  during  the  soci- 
ety's running.  About  this  period,  in  either  case,  a  settlement 
must  take  place  between  the  association  and  its  borrowers. 
But  as  it  does  not  follow  that  all  mortgages  held  by  the  soci- 
ety against  its  members  must  of  necessity  then  be  cancelled,  a 
member  having  the  right  to  apply  his  stock-payments  to  the 
liquidation  of  his  debt,  or  not,  as  he  pleases,  provided  the 
society's  claim  is  satisfied ; '  it  is  perfectly  clear  that  a  mort- 
gage stipulating  for  the  repayment  of  a  sum  certain,  at  a 
time  certain,  whilst  it  answers  every  purpose  aimed  at  by  the 
society,  will  be  more  readily  disposed  of  and  realized  upon 
by  way  of  assignment,  than  one  which  lacks  certainty  in 

1  See Kupfert 0. Guttenberg Build-  »  See  Silver?.  Barnes,  37 E.  C.  L. 
ing  Association,  30  Pa.  St.  485;  and  R.  335;  6  Bing.  N  C.  180;  «  Scott,, 
see  also,  post,  Ch.  xvi.  300.  8  See  post,  §§  453-453. 


328  THE   LAW   OF   BUILDING   ASSOCIATIONS.       | '  II.    XII. 

these  particulars,  and  is,  therefore,  a  more  generally  available 
security. 

§  333.  The  fact,  that,  in  some  loans  by  building  associa- 
tions, interest  upon  the  advance  is  not  reserved  as  such,  can 
make  no  difference  in  the  essential  nature  of  the  transaction, 
win -re  its  equivalent  is  added  to  the  borrowing  member's 
stated  contributions,  the  payment  of  which,  thus  increa-r'l, 
is  secured  "by  his  mortgage.  Thus,  if  the  par  value  of  a 
share  be  $200,  the  monthly  dues  upon  which,  for  an  invent- 
ing member,  are  $1,  but,  after  he  has  taken  a  loan  of  siino 
from  the  association,  become  £2,  it  is  perfectly  evident  that 
the  additional  $1  per  month  exactly  represents  the  interest 
he  would  have  to  pay,  at  six  per  cent,  per  annum,  upon  SL"III, 
whether  it  be  called  dues,  interest,  or  redemption  money. 
Calling  it  by  another  name  does  not  make  it  another  thing.1 
Some  distinctions  may,  of  course,  arise  where  such  an  arrange- 
ment is  adopted,  as  to  the  interpretation  of  the  word  <1n<  s 
and  of  the  liabilities  of  borrowing  members  in  respect  of 
them,4  but  there  is  no  difference,  so  far  as  the  practical 
results  of  the  contract  are  concerned,  between  the  two 
methods  of  securing  to  the  society  the  full  return  of  its 
outlay.3 

§  33-i.  An  exact  analysis  of  the  transaction  between  the 
building  association  and  its  borrowing  member,  therefore, 
discloses  this  primary  fact,  that  the  reimbursement  which  he 
owes  to  the  society,  proceeds  upon  the  basis  of  a  return  of 
principal  and  interest,  whether,  under  the  construction  of  any 
particular  statute,  this  principal,  upon  which  interest  is  to  be 
charged,  be  taken  to  include  both  the  amount  actually  chang- 
ing hands  and  the  premium  contracted  for ;  or  whether,  for 
the  purposes  of  interest,  the  real  principal  be  considered  as 
represented  only  by  the  sum  which  he,  in  point  of  fact,  has 
received  into  his  hands,  the  premium  being  regarded  as  an 
additional  and  separate  undertaking,  forming  no  part  of  the 
loan  proper,  and  hence  not  liable  to  carry  with  it  the  pay- 
ment of  interest  so  far  as  it  is  concerned.4 

1  See  Delano  v.  Wild  et  al.,  6  Al-  is    practically    charged    upon    the 

leu  (Mass.),  1.        *  See  post,  §  373.  amount  advanced  together  with  the 

1  Except  that  in  the  latter  case  premium  bid. 
the  interest,  under  the  name  of  dues,         4  See  post,  §§  369-370,  398. 


§  335. J         LOANS  OR   ADVANCEMENTS  TO   MEMBERS.  329 

§  335.  The  features  thus  far  developed  give  evidence  of 
little  beyond  a  mere  transaction  of  loan  :  and  yet  the  element 
which  lifts  it  beyond  this  conception  has  of  necessity  already 
been  hinted  at.  It  lies  in  the  fact,  that,  whatever  is  paid  by 
the  borrower,  by  way  of  premium,  interest,  dues,  fines,  etc., 
becomes  a  portion  of  the  common  fund,  and,  being  re-in- 
vested, adds  its  profits  to  the  great  bulk  in  which  he  has  a 
proportionate  interest;  and  these,  being  again  re-invested, 
and  so  on,  ad  infinitum,  continue  to  swell  the  assets  of  the 
association,  until,  in  due  course  of  time,  distribution  can  be 
made,  and  advanced  members  may  be  relieved  of  their  obli- 
gations. Thus  the  borrower  himself  profits  by  his  own  pay- 
ments :  he  is,  in  a  measure,  at  once  the  lender  and  the  bor- 
rower, the  payer  of  the  interest  and  the  recipient  of  his  own 
payments.  Yet,  such  he  is  not  directly,  but  only  consequen- 
tially. He  contracts,  in  no  literal  sense  of  the  word,  with 
himself,  but  with  the  corporation.  His  own  individuality  is 
merged  in  it  as  the  lender.  He  does  not  deal  with  his  fellow 
members  of  the  association,  as  with  so  many  partners.  The 
transaction  is  not  a  dealing  in  partnership  funds  pure  and 
simple  ;  for  members  of  a  corporation  are  not  partners,  even 
as  between  themselves,1  and  a  corporation  is  not  a  partner- 
ship. Nevertheless,  so  closely  does  the  organization  of  a 
building  association  resemble  that  of  a  partnership,  that  it  is 
almost  impossible  to  draw  the  line  precisely  where  the  attri- 
butes of  a  partnership  end  and  those  of  a  mere  corporation 
begin.3  As  a  mere  member,  his  interest  in  the  society's 
lands  and  assets  is  essentially  that  of  a  stockholder  in  a  corpo- 
ration, not  that  of  a  partner  in  the  partnership  property ;  yet 
in  no  other  corporation  known  to  the  law  do  all  the  payments 
made  by  a  member,  who  is  at  the  same  time  a  borrower  so  di- 
rectly affect  the  extent  of  his  liabilities  to  the  corporation,  at 
any  moment  at  which  he  desires  to  balance  against  them  his 
interests  in  the  same,  nor  so  distinctly  impress  him  with  the  du- 
plex character  of  creditor  and  debtor  at  one  and  the  same  time.1 

1  Baker  «.  Adm'r  of  Backus,  32  s  This    refers    to    incorporated 

111.    82;    Crystal  Lake  Ice  Co.    v.  building  associations.     As  to  uuin- 

Sainc.  Ib.  corporaled  societies,  see  post,   Ch. 

*  See  Est.  National  Building  As-  xx. 
sociation,  9  \V.  N.  C.  (Pa.)  ?<J. 


330  THE  LAW  OF  BUILDING  ASSOCIATIONS.      [CH.  XII. 

§  336.  An  additional  and  equally  important  element,  in- 
timately involved  in  that  just  considered,  is  the  uncertainty, 
which,  to  the  very  final  settlement,  leaves  the  exact  extent  of 
the  borrowing  member's  reciprocal  rights  and  liabilities  in 
doubt.  As  a  member  of  the  association,  he  is  bound  to  con- 
tribute his  proportionate  share  to  the  payment  of  its  expenses, 
and  to  bear  his  proportion  of  the  common  losses.  The  nature 
of  a  building  association's  business  necessarily  brings  with  it 
great  and  constantly  recurring  risks.  It  may  be  fortunate 
and  it  may  be  unfortunate.  In  the  former  case,  the  accumu- 
lation will  be  exceedingly  rapid,  under  the  operation  of  the 
rules  of  compound  interest,  and  he  will  be  in  a  position  to 
discharge  his  debt  in  so  short  a  time  after  its  creation,  that, 
notwithstanding  his  heavy  undertakings  at  the  outset,  the  sum 
total  of  his  disbursements  may  not  have  drained  him  more,  to 
any  appreciable  extent,  than  an  ordinary  loan  of  the  same 
amount  would  have  done,  in  the  discharge  of  which  he  would 
not  have  had  the  advantage  of  the  easy  and  gradual  method 
of  repayment.  In  the  other  case,  he  will,  in  common  with 
the  rest  of  the  members,  and  to  precisely  the  same  extent, 
labor  under  the  difficulties  which  beset  the  association,  and 
the  effect  of  these  drawbacks  will  be  the  postponement  and 
aggravation  of  the  burden  of  his  contract.  A  larger  propor- 
tion of  his  contributions,  and  of  the  profits  thereon,  will  be 
absorbed  in  discharging  his  obligations  as  a  member,  a  less- 
er one  will  be  available  for  the  discharge  of  his  obligations 
as  a  debtor  of  the  association.  These  contingencies,  however, 
are  incalculable  up  to  the  time  when  the  association  is  in  a 
position  to  pay  out  the  shares  in  cash.  There  has  been  a  loan ; 
the  method  of  its  repayment  is  pointed  out ;  but  there  is  no 
telling  what  will  be  required  to  repay  the  loan.  Under  all 
circumstances,  it  will  be  the  par  value  of  the  shares  advanced : 
but  how  much  the  member  will  be  obliged  to  pay  until  they 
have  attained  that  figure,  it  is  impossible  to  foretell.  It  may 
be  approximated  upon  the  theory  of  annuities,  as  in  mort- 
gages given  merely  for  the  payment  of  dues ;  but  it  cannot 
be  ascertained  with  infallible  accuracy  before  winding  up. 
The  figure,  indeed,  may  be  stated  in  the  obligation ;  but  when 
that  amount  will  have  accumulated  to  the  borrower's  share  in 
the  undivided  funds  of  the  association,  when,  only,  that  sum 


§337.]          LOANS    OR   ADVANCEMENTS   TO    MEMBERS.  331 

becomes  repayable,  no  man  can  tell  until  the  time  has  actu- 
ally arrived. 

§  337.  Tims,  there  appear  to  be  combined  in  this  trans- 
action two  distinct  elements  inseparably  blended,  viz. ;  that  of 
a  loan,  and  that  of  a  partnership  venture.  Exclusively,  it  is 
neither ;  nor  can  either  element  properly  be  said  to  impress 
the  transaction  with  its  distinctive  character  more  decidedly 
than  the  other.  But  either  the  one  or  the  other  side  may,  in 
the  formal  parts  of  the  transaction,  be  presented  with  pecu- 
liar prominence.  Where  the  method  pursued  is  technically 
that  of  a  redemption  of  the  stock  by  the  society,  and  an  un- 
dertaking by  the  advanced  member  to  continue  the  payment 
of  dues,  etc.,  during  the  society's  existence,  no  mention  being 
made  of  the  return  of  a  specific  sum  of  money,  the  partner- 
ship feature  is  notably  striking ;  whilst  the  underlying  fact 
of  an  actual  loan  is,  at  the  first  glance,  thrown  into  the  back- 
ground. The  converse  of  this  occurs  where  there  is  the  re- 
cital of  a  loan  of  a  specific  amount  and  a  stipulation  for  its 
return.  Substantially  both  are  the  same ;  but,  accordingly  as 
the  one  or  the  other  mode  has  been  prevalent,  the  courts,  as 
a  general  thing,  have  contented  themselves  to  go  no  further 
than  t\\e prima fades )  and  have  based  their  theories  upon  it, 
holding  the  one  to  be  a  partnership  transaction,  the  other  to 
be  a  mere  loan,  as  the  one  or  the  other  appeared  to  be  sanc- 
tioned by  the  statutes,  and  by  previous  judicial  interpretation 
of  similar  contracts.  The  safe  rule  to  follow,  and  the  rule 
which  courts  have  practically,  if  not  avowedly,  followed  in 
most  instances,  particularly  in  the  United  States,  is  this :  The 
two  elements  being  in  a  state  of  such  perfect  equipoise,  as 
to  entitle  neither  to  indubitable  preponderance,  when  any 
question  of  legality  or  reciprocal  rights  depends  upon  the  rec- 
ognition of  the  one  or  the  other  as  governing  the  construc- 
tion of  the  contract,  if  the  association  has  proceeded  ami  is 
proceeding  under  a  statute  authorizing  the  formal  methods 
and  the  practical  results  of  such  contracts,  the  weight  of  de- 
cision must  be  thrown  to  the  effectuating  of  the  intention  of 
the  legislature;  if  the  association  is  not  proceeding  under  the 
protection  of  such  express  legislative  sanction,  the  benefit  of 
the  doubt  must  be  given  to  the  individual  seeking  to  escape 
an  apparently  or  actually  exorbitant  demand,  and  against  the 


332  THE  LAW   OF  BUILDING    ASSOCIATIONS.        [CH.  XII. 

association  endeavoring  to  enforce  a  contract  which  partakes 
equally  of  two  elements,  one  of  which  would  render  it  lawful, 
the  other  unlawful. 

In  order  to  give  the  reader  a  perfectly  clear  and  can- 
did view  of  the  state  of  the  law  upon  this  subject,  it  is  in- 
dispensable to  present  a  synopsis  of  the  leading  decisions 
found  in  the  reports  of  England  and  the  several  States  of  the 

Union. 

i 

Interpretation  by  the  Various  Courts  of  the  Nature  of  Loans  or  Ad- 
vancements in  Building  Associations.     Decisions  in  England. 

§  338.  In  the  case  of  Silver  v.  Barnes?  it  appeared  that, 
under  the  rules  of  the  society,  advances  were  made  to  mem- 
bers, from  time  to  time,  at  five  per  cent,  interest ;  the  sums 
so  advanced  were  put  up  to  competition  among  the  members, 
and  the  member  who  bid  highest  obtained  the  loan.  The  de- 
fendant, a  member  of  the  society,  having  bid  £15  17s.  66?.  for 
a  loan  of  £80,  gave  his  note,  payable  on  demand,  for  £80,  with 
interest,  the  premium  of  £15  17s.  6d.  being  agreed  upon,  in  ad- 
dition ;  the  whole  sum  of  £95  17s.  Qd.,  and  interest  on  £80,  to 
be  paid  by  monthly  installments  of  16s.  On  an  action  being 
brought  upon  the  note,  these  facts  were  set  out,  and  usury  plead- 
ed. Upon  the  trial,  the  judge  left  it  to  the  jury  to  say  whether 
the  partnership  was  a  shift  and  contrivance  to  evade  the  usury 
laws ;  if  so,  they  were  to  find  for  the  defendant :  but  if  they 
thought  it  a  bonajlde  partnership,  to  find  for  the  plaintiffs. 
The  jury  gave  a  verdict  for  the  latter,  and  Tindal,  C.  J.,  re- 
fused to  set  it  aside,  on  the  ground  of  misdirection.  "  The  ques- 
tion was,  whether  the  transaction  was  a  loan  of  money,  or  a 
dealing  with  the  partnership  fund.  If  it  was  a  loan  it  was  usu- 
rious. We  think  it  was  a  dealing  with  the  partnership  fund,  in 
which  the  defendant  had  an  interest  in  common  with  the  other 
members  of  the  society,  and  that  it  was  not  a  loan.  The  de- 
fendant was  interested  in  the  fund  when  the  money  was  ad- 
vanced and  when  it  was  repaid.  The  rules  of  the  society  are, 
in  effect,  a  mere  agreement  by  partners  that  their  joint  con- 
tributions shall  be  advanced  for  the  use  of  the  one  or  the  other 
as  occasion  requires  ;  and  the  transaction  was  not  a  borrowing 
by  the  maker  of  the  note  from  the  payees."  A  case  is  then 

1  6  Bing.,  K  C.  180;    8  Scott,  300;  37  Engl.  C.  L.  Rep.  335. 


§338.]          LOANS  OB  ADVANCEMENTS  TO   MEMBERS.  333 

referred  to  before  Alexander,  C.  B.,  in  the  year  1828,  in  which 
;u i  advance  from  a  similar  society  to  one  of  its  members  was 
held  to  be  a  partnership  transaction,  and  not  a  loan. 

In  Burbidge  v.  Cotton*  the  objects  of  the  society,  certi- 
fied in  1845,  were  to  advance  the  society's  funds  to  its 
members,  to  accumulate  and  divide  the  profits  periodical- 
ly. The  advances  were  made  by  putting  up  a  share  at  one 
of  the  meetings  for  competition  among  the  members,  and  the 
highest  bidder  was  entitled  to  the  advance  on  that  share,  and 
as  many  more,  to  the  number  of  twenty,  as  he  chose  to  take 
at  the  same  premium.  For  each  share  so  taken,  he  was  to 
pay  the  premium  agreed  upon,  and  also  85.  a  month,  for  100 
months  (during  which  time  the  society  was  to  exist)  as  re- 
demption money  ;  and  on  these  conditions  he  might  have  an 
advance  of  £100,  the  full  value  of  his  share,  on  giving 
security  for  the  repayment  of  it,  together  with  such  premium 
and  redemption  money.  He  was  also  entitled  to  participate 
in  the  general  profits  of  the  society.  B.  became  a  member 
of  the  society,  and  obtained  an  advancement  of  five  shares  at 
premiums  of  £71  for  three,  and  £73  for  the  remaining  two, 
receiving  an  advance  of  £500  upon  giving  the  security  re- 
quired. Subsequently  he  died,  and,  the  society  pressing  for 
the  payment  of  the  moneys  secured  to  them,  B.'s  executrix 
filed  a  bill  against  them,  alleging  that  the  transaction  was 
usurious,  and  the  society  illegal,  and  claiming  to  redeem  the 
security  on  repayment  of  £500  with  legal  interest.  It  was 
held  (besides,  that  the  question  of  legality  or  illegality  of  the 
association  could  not  be  determined  in  this  proceeding)  that, 
upon  the  principle  of  Silver  v.  Barnes,  the  transaction  was 
a  dealing  with  partnership  funds,  and  not  a  loan,  and  hence 
there  could  be  no  question  of  usury. 

In  Seagrave  v.  Pope?  a  member  was  advanced  upon  ten 
shares,  on  two  different  occasions,  at  a  premium  of  £45  1<>.<J. 
per  share  of  £100.  Receiving  at  each  time  £272  lite.,  he 
gave  two  mortgages,  conditioned  for  payment  of  dues,  etc., 
and  3$.  6d.  per  share  redemption  money,  in  the  rules  also 
called  interest.  Desiring  to  transfer  these  mortgages  upon 

1  8  Engl.  Law  and  Eq.  Rep.  57;  21  » 15  Engl.  L.  and  Eq.  477:  22  L. 
L.  J.,  Ch.  201;  15  Jur.  1070;  5  De  J.,  Ch.  258:  16  Jur.  1099;  1  De  G.. 
G.  and  Sm.  17.  M.  and  G.  783;  L.  T.  Rep  173. 


334  THE   LAW   OF  BUILDING    ASSOCIATIONS.      [CH.  XII. 

other  property,  and  obtaining  the  consent  of  the  directors 
thereto,  a  deed  was  drawn,  by  which,  in  consideration  of  £.".44. 
to  him  paid  by  the  trustees  of  the  building  association,  he  as 
signed  to  them  certain  lease-hold  property,  upon  trust  to  per- 
mit him,  so  long  as  he  should  duly  make  the  several  pay 
ments,  and  observe  the  regulations,  prescribed  in  the  articles 
of  the  society  in  respect  of  said  shares,  etc.,  to  hold  said  prem- 
ises, and  receive  the  rents  thereof  for  his  benefit :  in  case  of 
default  for  six  months,  these  to  be  taken  by  the  society,  and 
if  insufficient  with  their  revenues  to  cover  the  payments,  due 
upon  his  undertaking,  to  be  sold.  Truro,  L.  C.,  held,  in  an 
elaborate  opinion,  that  the  transaction  was  not  a  loan,  but  an 
anticipatory  payment,  by  way  of  discount,  of  the  shares  the 
members  would  otherwise  be  entitled  to  claim  payment  of 
at  the  termination  of  the  society.  The  3*.  Gd.  per  share, 
although  called  "  redemption  money  or  interest,"  in  the  rules 
of  the  society,  the  Lord  Chancellor  held  to  be  a  consideration, 
not  for  the  loan  of  money  to  be  returned,  but  for  a  repay- 
ment to  the  member  made  earlier  than  he  would,  of  right,  bo 
entitled  to  receive  it.  And  similarly  other  phrases,  in  the 
society's  rules,  seeming  to  indicate  that  they  regarded  the 
transaction  as  a  loan,  e.g.,  the  rule  that  no  second  mortgage 
shall  be  deemed  a  sufficient  security  for  any  moneys  to  be  ad- 
vanced by  the  society, — a  provision  for  redemption  beginning 
with  the  words,  "  That  if  any  member  of  the  society  having 
purchased  any  share  or  shares,  and  secured  the  repayment 
thereof," — or  "security  which  shall  have  been  given  for  the 
same," — are  all  held  to  be  merely  inapt  expressions,  inap- 
plicable, in  strictness,  to  the  nature  of  the  real  transaction. 
Yet,  in  the  course  of  the  opinion,  it  is  significantly  said,  that 
the  securing  of  the  payment  of  dues  "  virtually  amounts  to  a 
securing  the  repayment  of  the  sum  advanced,  but  something 
more,  as  the  monthly  payments  will  be  sure  to  cover  and 
exceed  the  amount  advanced."  This  excess  is,  clearly,  the 
premium  bid,  and,  if  the  dues  are  taken  to  include  the  re- 
demption money,  the  accruing  interest,  besides. 

These  cases  are  regarded  as  establishing  the  principle  in 
England  that  the  transaction  is  to  be  viewed  as  a  dealing  in 
partnership  funds,  and,  in  that  sense,  have  been  uniformly 


§  340.]         LOANS   OR   ADVANCEMENTS  TO   MEMBERS.  335 

followed  in  subsequent  decisions.1  It  must  be  observed,  how- 
ever, that  the  doctrine  of  Silver  v.  Barnes  appeai-s  to  have 
been  carried  a  step  farther  than  originally  intended.  In  that 
case,  as  has  been  seen,  the  nature  of  the  contract  had  been 
left  to  the  jury,  and  upon  their  finding  that  it  was,  in  fact,  a 
partnership  arrangement,  the  court  merely  refused  to  disturb 
the  verdict,  or  to  declare  the  transaction  illegal  upon  its  face. 
The  later  cases  admit  no  question  as  to  the  nature  of  the 
transaction,  but  take  it  for  granted,  that  it  is  a  partnership 
transaction,  and  proceed  upon  that  as  a  legal  postulate. 

Decisions  in  Maryland. 

§  339.  In  this  axiomatic  shape,  the  doctrine  seems  to  have 
found  its  way  to  Maryland.  In  Robertson  v.  The  American 
Homestead  Association?  the  cpurt  say :  "  We  adopt  the 
views  expressed  by  the  Court  of  Queen's  Bench  in  Silver  v. 
Barnes,  .  .  .  and  by  the  Courts  of  Chancery  in  England,  in 
Burlidge  v.  Cotton,  .  .  .  and  Seagrave  v.  Pope.  .  .  .  This 
last  case  involved  the  construction  of  a  mortgage  exe- 
cuted in  conformity  with  the  Statute  of  6  and  7  Will.  I V. 
Ch.  32,  almost  identical  in  its  terms  with  the  mortgage  before 
us."  And  these  views  have  been  subsequently  applied  in 
that  State,8  but  only  where  the  mortgages  were  given  for 
the  payment  of  dues,  etc.,  merely,  for  the  indefinite  period 
of  the  society's  continuance  in  strict  accordance  with  the 
statute,  and  where  the  association  advancing  the  money  was 
organized  under  the  building  association's  act,  and  came  pre- 
cisely within  its  meaning.4 
Decisions  in  Kansas. 

§  340.  The  same  principles  are  adopted  in  Kansas,  in  the 
case  of  M«KKe>/  v.  TJie  Citizens'  Building  and  Saving 

1  See  Cutbill  t>.  Kingdom,  17  L.  liar  v.    The    Baltimore 

J.,   Ex.   177;  1   Exch.   494;  In  re  Loan  and  Annuity  Association,  45 

Durham  County  Permanent  Benefit  Md.  546. 

Building  Society,  Davis's  Case,  Wil-  4  See  Williar  «.   The  Baltimore 

son's  Case,  Law  Rep.,  12  Eq.  516;  Butchers'  Loan  and  Annuity  A>M>- 

8.  C.,  25  L.  T.  Rep.,  N.  S.  83.  elation,  ubi  supra;  The  Baltimore 

*  10  Md.  897  (411).  Permanent  Building  and  Land  So- 

8  See  Shannon  v.   The    Howard  ciety  v.  Taylor,  41  Md.  409;  Bir- 

Mutual    Building    Association,    36  mingham  et  al.  v.   The  Maryland 

Md.  383;  Lister  B.  Log  Cabin  Build-  Land    and  Permanent   Homestead 

ing  Association,  88  Md.  115;  Wil-  Association,  45  Md.  541 


336  THE   LAW  OF  BUILDING   ASSOCIATIONS.       [CH.  XII. 

elation  of  Paola.1  The  facts,  that  the  borrower  continued 
to  have  an  interest  in  the  company  after  receiving  the  loan; 
that  he  remained  a  member ;  that  he  was  interested  in  having 
his  debt  cancelled  at  as  early  a  day  as  possible,  through  the 
aid  of  the  accumulation  of  the  common  fund  in  which  he  had 
a  share ;  that,  the  more  he  contributed  himself,  by  way  of 
payments,  to  the  increase  of  the  society's  funds,  the  sooner 
would  that  time  be  likely  to  arrive ;  and  that  the  amount  he 
would,  upon  the  winding-up  of  the  concern,  have  paid,  was 
quite  uncertain,  were  held  to  be  elements  excluding  the  no- 
tion of  a  mere  loan,  and  recommending  that  of  a  mere  part- 
nership transaction. 

Decisions  in  Massachusetts. 

§  341.  In  Massachusetts,  the  decision  in  Merrill  et  al.  v. 
Mclntire?  does  not  distinctly  proceed  upon  the  English 
doctrine.  The  ground  taken  as  a  basis  for  the  assumption 
that  the  transaction  is  not  one  of  mere  loan,  seems  rather  to 
be  the  uncertainty  of  the  issue.  "The  monthly  payment 
which  he  stipulated  to  pay  as  long  as  the  association  should 
continue  to  exist,  was  not  simply  for  the  use  of  the  money,  or 
forbearance  of  repayment  of  the  principal,  but  for  the  privi- 
lege accorded  to  him  of  becoming  an  owner  of  a  certain 
number  of  shares,-  and  of  eventually  taking  the  dividend  to 
which,  by  the  articles  of  agreement,  he  would,  upon  the 
winding  up  of  the  affairs  and  general  settlement  of  the  con- 
cerns of  the  association,  be  entitled.  Whether  the  arrangement 
made  was  one  which  would  be  likely  to  result  advantageously, 
was  a  question  upon  which  to  exercise  his  own  judgment. 
All  the  associates  had  the  same  right.  Each  one  would  de- 
termine for  himself  what  was  the  value  of  the  prospective 
benefit  to  be  enjoyed,  and  would  make  his  offer  for  the 
money  to  be  loaned,  according  to  his  estimate  of  the  worth  of 
the  shares  which  he  was  allowed  to  take  and  of  which  he 
became  the  owner.  .  .  .  Whether  the  advantages  antici- 
pated will  finally  be  obtained,  may  perhaps  be  questionable ; 

1  22  Kas.  624.      But  in  Hekeln-  sociation,  Ib.   746,   the  court  pro- 

fraemper  v.  The  German  Building  ceeds  upon  the  doctrine  and  assuror  - 

Association,    Ib.  549,  followed  by  tion  of  a  nv  re  loan, 

tjlynn  et  al.  v.  Home  Building  As-  *  13  Gray.  157 


§  342.]          LOANS  OR  ADVANCEMENTS  TO   MEMBERS.  337 

but  since  the  borrower,  under  such  circumstances,  is  to  have 
his  full  proportion  of  the  benefit  of  all  the  gain  which  may 
be  made,  he  cannot  assert  that  he  has  contracted  to  pay,  or 
that  the  lender  has  reserved  to  himself,  a  usurious  rate  of  in- 
terest." ' 

But  in  Delano  v.  Wild  et  al.*  the  question  receives  the 
most  exhaustive  consideration.  After  looking  at  the  trans- 
action in  the  light  of  a  purchase,  by  the  society,  of  the  bor- 
rowing member's  prospective  interest,  in  which  the  price  he 
might  be  willing  to  take  therefor,  must  properly  be  the  sul>- 
ject  of  negotiation,  owing  to  the  element  of  uncertainty, 
which,  even  considering  the  monthly  contributions  as  a  sub- 
stantial repayment  of  the  principal  advanced,  must  leave  it 
"  entirely  uncertain  at  the  time  of  the  advancement,  what 
sum,  including  interest,  would  ultimately  prove  to  be  re- 
quired in  fulfilment  of  the  contract,  to  be  paid  upon  it ;"  so 
that,  so  far  as  this  element  is  concerned,  "  the  redemption  by 
the  company  of  a  share  of  one  of  its  members  resembles, 
and  is,  in  some  degree,  analogous  to  those  contracts  which  are 
held  not  to  be  usurious,  although  containing  stipulations  for 
the  payment  of  extra  interest,  because  the  principal  is  put  at 
hazard  by  being  made  to  depend  upon  contingent  or  fortui- 
tous events,  as  in  the  cases  of  bottomry  and  respondentia,  on 
loans  on  post  obit  bonds  and  the  like :"  *  the  court  say,  "  Fi- 
nally, the  transaction  between  the  parties  cannot  be  deemed 
to  embrace  an  agreement  between  them  for  the  reservation  of 
payment  of  usurious  interest,  because  it  is  a  dealing  between 
them  as  partners  in  relation  to  a  partnership  fund,  in  which 
they  had  a  common  interest."  This  case  avowedly  rests 
upon  that  of  Silver  v.  Barnes*  and  is  followed  in  Bowker 
v.  Mill  River  Loan  Fund  Association? 

Decisions  in  New  Jersey. 

§  342.  The  case  of  Delano  v.  Wild,  is  approvingly  cited 
in  New  Jersey,  in  Clarkville  Building  and  Loan  Associa- 
tion v.  Stephens*  it  being  there,  too,  observed  that,  " the  as- 

1  See,  to  the  same  effect,  Baxter        3  Cit.  2  Pars.  Con.  415;  Thorn. 

v.  Mclntire,  13  Gray  (Mass.),  168;  dike  v.  Stone.  11  Pick.  183. 
Marker  et  al.    «.    Bigelow,   15  Id.         *  Supra,  §  338. 
130.  •  7  Allen  (Mass.),  100. 

s  6  Allen,  1.  « 11  C.  E.  Gr.  351  (355). 


338  THE   LAW  OF   BUILDING   ASSOCIATIONS.       [CH.  XII. 

sociation,  in  this  case  (Delano  v.  Wild),  was  unincorporated, 
but  the  principle  declared,  if  sound,  must  govern  the  rights 
of  the  members  of  an  incorporated  association."  ' 

And  in  Iloboken  Building  Association  v.  Martin*  the 
method  of  making  the  loan  being  under  the  guise  of  a  re- 
demption by  the  society  of  its  stock  held  by  the  member 
offering  it  at  the  lowest  price,  it  is  said :  "  The  money  was 
not  advanced  by  way  of  loan,  but  in  redemption  of  the  de- 
fendant's share,  a  mode  of  investment  provided  for  by  the 
constitution  of  the  association,  authorized  by  the  act  of  in- 
corporation." ' 

Decisions  in  Virginia  (and  District  of  Colombia). 

§  343.  In  Virginia,  where  it  is  held  that  the  contract  be- 
tween the  association  and  the  borrower  involves  the  total 
cessation  of  his  interest  and  membership  in  the  concern,  and 
the  total  extinguishment  of  his  stock,  his  mortgage  binding 
him,  however,  to  continue  certain  payments  during  the  asso- 
ciation's existence,4  it  is  said  that  "  the  price  of  the  shares  is 
not  a  loan,"  but  a  redemption,  after  which,  "  if  they  continued 
in  existence  for  any  purpose  whatever,  they  could  only  so 
continue  as  the  absolute  property  of  the  association,  and  of 
course  could  not  be  sold  for  any  debt  due  to  it."  ' 

Decisions  in  New  Hampshire. 

§  344.  In  New  Hampshire,  in  the  case  of  Shannon  et  al., 
Trustees  Manchester  Loan  and  Fund  Association  v.  Dunn* 

1  The  logic  of  this  statement  is  8  Winchester  Building  Associa- 

not  very  apparent.  tion  «.  Gilbert  et  al.,  supra.  A 

*  2  Beas.  428.  See  also  Franklin  similar  doctrine  seems  to  be  held  in 

Building  Association  v.  Marsh,  5  the  District  of  Columbia,  where  it 

Dutch.  (N.  J.)  225.  is  said  that  the  advance  of  money 

3  See    also    State,    Washington  made  by  a  building  association  to 
Building   and    Loan    Association,  one  of  its  stockholders  upon  the 
pros.  v.  Hornbacker,  13  Vr.  (N.  J.)  shares  which  he  owns,  is  not  a  loan 
635,  where  a  distinction  seems  to  be  of  money,  but  a  purchase  of  such 
attempted  between  the  effect  of  the  stock,  and  is  therefore  not  subject  to 
technical  process  of   "redeeming"  the  usury  laws.    Pabst  v.  Building 
shares,    and    of    "loaning"    upon  Association,  1  McArthur,  385;  Mul- 
shares.     See  post,  §  440.  loy  v.  Fifth-Ward  Building  Associa- 

4  See  White  v.  Mechanics'  Build-  tion,  2  Id.  594. 

ing  Association,   22  Grattan,   233;        «  43  N.  H.  194.     This  also  was 
Winchester  Building  Association  t.     an  unincorporated  society. 
Gilbert  et  al.,  23  Ib.  787. 


§345.]          LOANS   OR   ADVANCEMENTS   TO   MEMBERS.  339 

the  Massachusetts  decisions  are  also  followed,  to  the  extent 
of  holding  the  contract  of  loan  prima  facie  a  partnership 
dealing,  and,  consequently,  free  from  usury ;  the  question, 
however,  whether  there  be  usury  or  not  in  the  transac- 
tion, being  left,  not  to  the  court,  on  the  face  of  the  con- 
tract, but  to  the  jury  to  find  from  all  the  circumstances  of 
the  case. 

Decisions  in  New  York. 

§  345.  Similar  seems  to  be,  in  New  York,  the  leaning 
of  The  Citizens'  Mutual  Loan  Association  v.  Webster,1  in 
which  the  contract  was  for  payment  of  dues,  not  for  the 
return  of  the  principal  absolutely.  Whilst  the  court  says  that, 
*'  the  moneys  collected  by  the  association  being  the  mutual 
property  of  all  the  members,  and  the  greater  the  accumu- 
lation, the  shorter  being  the  period  during  which  they  will 
have  to  bear  the  burden  of  paying  the  moneys  for  the  pur- 
pose of  accumulation,  the  ordinary  objections  to  the  collec- 
tion of  interest  beyond  the  fixed  rates  are  removed  ;"  yet  this 
is  preceded,  in  an  earlier  part  of  the  opinion,  by  the  state- 
ment :  "  Whether  the  payments  required  to  be  made  by  this 
bond,  in  order  to  prevent  forfeiture,  will  exceed  the  principal 
and  legal  interest  of  the  amount  advanced  to  the  defendant, 
will  depend  upon  matters  not  brought  before  the  court.  .  .  . 
If  the  principal  were  payable  absolutely,  there  could  be  no 
doubt  of  usury," 2  and  that  the  contract  in  question  might 
be,  and  perhaps  might  be  shown  to  have  been  usurious,  is 
expressly  stated  by  the  court. 

But  in  Melville  v.  The  American  Beneficial  Building 
Association  et  al.*  where  the  contract  was  substantially  the 
same  as  in  the  preceding  case,  but  the  association  was  unin- 
corporated, the  doctrine  of  a  partnership  transaction  was  held 
inapplicable :  "  The  English  cases  .  .  .  are  distinguishable 
from  the  present,  in  that  all  those  cases  arose  out  of  trans- 
actions of  associations  formed  under  and  authorized  by 
statute." 

1  25  Barb.  263.      See  also  City  ferent  from  the  other  arrangement, 

Building  and  Loan  Association  v.  see  ante,  §  331. 

Fatty,  1  Abb.  App.  Dec.  347.  »  33  Barb.  103. 

*  That  this  is  really  nothing  dif- 


340  THK    LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  XII. 

Decisions  in  Georgia. 

§  346.  In  Georgia,  the  doctrine  adopted  by  the  courts  is 
very  closely  akin  to  that  held  in  the  last  two  States.  In 
Parker  v.  The  Fulton  Loan  and  Building  Association,1  a 
distinction  between  the  transaction  of  a  formal  sale  of  the 
stock  to  the  association  and  a  mere  loan  is  recognized  on  the 
ground  of  the  borrower's  continued  interest  in  the  society's 
affairs, — his  partnership  relations.  "And  if  there  can  lie- 
any  difference  arising  from  the  fact  that  the  sale  is  made  to 
the  company  itself,  it  is  only  in  this,  that  the  seller  himself 
then  is  and  continues  interested  in  the  purchase,  as  well  as  in 
every  sale  and  purchase  until  the  final  winding  up  of  the 
enterprise.  If  he  sold  it  to  a  stranger,  no  matter  at  what 
discount,  there  could  be  no  question  of  usury ;  much  less  can 
such  be  the  case  where  he  sells  it  to  an  organization  of  which 
he  is  a  member  and  an  interested  party." 

In  a  case  anterior  to  this  in  point  of  time,  that  of  The 
J3ilb  County  Loan  Association  v.  Richards?  the  same 
principle  had  been  adverted  to,  and  it  had  been  further  said : 
"  Perhaps  the  best  argument  in  support  of  this  transaction,  is 
the  risk  and  uncertainty  attending  the  result.  Stock  is  put 
up  at  auction,  the  terms  of  the  sale  are  distinctly  understood, 
and  a  sale  and  purchase  is  made,  taking  into  view  all  the 
contingencies  attendant  on  the  society,  whether  of  prosperity 
or  adversity,  during  the  few  or  many  years  of  its  existence. 
The  stock  may  be  worth  a  premium,  or  it  may  be  a  dead  loss 
at  the  end  of  the  operation.  This,  each  must  decide  for 
itself.  If  he  concludes  to  take  half  now  for  it,  that  is,  one 
hundred  dollars  for  stock  now,  nominally  worth  two  hundred 
dollars,  six,  eight,  or  ten  years  hence,  who  has  the  right  to 
say  he  judges  foolishly  ?  So,  on  the  part  of  the  association, 
they  run  the  hazard  of  losing  all.  The  debts  of  the  concern 
may  absorb  all  their  funds,  including  [the  borrower's]  bond 
and  mortgage,  so  that  instalments  paid  in,  out  of  their  pri- 

1  46  Ga.  166.  about  the  transaction,  and  that,  if 
s  21  Ga.  592.     McDonald,  J.,  dis-  tbere  were,  there  being  a  substan- 
sents  with  an  elaborate  opinion,  in  tial  loan,  the  transaction  was  not 
which  he  denies,   inter  alia,   that  necessarily  free  from  usury,  a  part- 
there  was  any  partnership  dealing  nership  having  no  more  right  than 


§  346.]         LOANS   OE  ADVANCEMENTS  TO   MEMBERS.  341 

vate  funds,  and  paid  to  [the  borrower]  for  liis  worthless 
stock,  in  advance,  ...  is  a  total  loss,  not  only  to  the  body 
corporate,  but  to  each  individual.*' 

Analogous  is  the  reasoning  in  Pattison  v.  The  Albany 
Building  and  Loan  Association*  where,  repelling  the  idea 
of  a  mere  loan  at  usury,  as  upon  the  face  of  the  contract,  it  is 
said  :  "  The  very  nature  of  such  an  institution  involves  a 
profit  and  loss  account,  and  an  expense  account  for  manage- 
ment. An  advanced,  or  borrowing  member,  as  well  as  the 
rest,  holds  a  relation  to  these  accounts  which  must  be  ad- 
justed before  he  can  repudiate  his  express  contract,  on  the 
plea  of  deficient  consideration  or  on  that  of  usury.  Whether 
he  gets  full  consideration,  or  whether  he  pays  usury,  does  not 
depend  simply  on  whether  the  amount  he  refunds  is  more 
than  he  has  drawn  out  with  lawful  interest  on  the  latter  sum. 
There  may  be  no  excess  after  deducting  from  his  payment 
his  due  share  of  the  losses  and  expenses.  As  he  takes  his 
chances,  in  case  an  early  winding  up  should  occur  (in  which 
event  his  payments  cease  from  that  time),  the  rule  of  equity 
requires  that  he  should  incur  the  hazards  fairly  incident  to 
the  business  in  the  way  of  losses  and  expenses,  and  bear  his 
due  proportion  of  the  same.  There  is  no  proper  basis  for 
ascertaining  usury  and  arriving  at  the  amount  of  it,  without 
all  these  elements  are  brought  in." 

But  the  application  of  the  partnership  principle  in  these 
cases,  whilst  prima  facie  recognized,  and,  consequently  the 
question  of  usury  or  no  usury,  are  to  be  left  to  the  jury, 
finding  that  the  organization  is,  in  fact,  and  l)ona  Jide,  one 
whose  real  intent  and  object  is  the  "  accumulating  a  fund 
by  monthly  subscriptions  or  savings  of  the  members  thereof, 
to  assist  them  in  procuring  for  themselves  such  real  estate  as 
they  may  deem  proper,"  and  not,  in  truth,  a  mere  device  to 
evade  the  usury  laws."  The  fact  of  the  borrower's  member- 
ship raises  no  conclusive  presumption  that  there  was  no  usury 
in  the  transaction.8 

an  individual  to  exceed    the  stat-  *  Parker  v.  The  Pulton  Loan  and 

utes  of  usury.      See  post,   §  347,  Building  Association,  46  Ga.  166. 

note.  J  See  Silver  t>.  Barnes,  supra. 
1  63  Ga.  373. 


342  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [CH.  XII. 

Decisions  in  North  Carolina  (and  South  Carolina). 

§  347.  In  North  Carolina,  the  case  of  Mills  et  al.  v.  The 
Salisbury  Building  and  Loan  Association '  appears  to 
put  the  transaction  upon  the  basis  of  a  mere  loan.  The 
declared  object  of  the  Legislature  being,  to  enable  and 
encourage  persons,  chiefly  poor  persons,  to  save  and  deposit 
their  littles,  and,  when  sufficiently  accumulated,  to  draw 
them  out  in  bulk  and  secure  homesteads ;  there  is  said  to  be 
nothing  contrary  to  the  spirit  of  the  act  in  allowing  those 
desiring  to  do  so,  to  draw  out  in  bulk  and  pay  back  in  littles. 
But  it  must  be  done  in  a  manner  not  to  frustrate  the  purposes 
of  the  society's  creation.  The  laws  governing  loans  between 
men  must  be  observed.  "  We  know  of  no  device  or  cover 
by  which  these  associations  can  take  from  those  who  borrow 
their  money,  more  than  the  legal  rate  of  interest,  without  in- 
curring the  penalties  of  our  usury  laws.  Calling  the  borrower 
'  a  partner,'  or  substituting  '  redeeming,'  for  lending,  or  '  pre- 
mium or  bonus '  for  the  amount  which  they  profess  to  have  ad- 
vanced, and  yet  withhold,  or  '  dues '  for  interest  or  any  like 
subterfuges,  will  not  avail.  We  look  at  the  substance." 

Hence,  in  Overby  and  Wife  v.  The  Fayetteville  Build- 
ing and  Loan  Association*  it  is  said  that  the  proper  mode 
of  adjustment  between  the  building  association  and  its 
borrowing  member,  is  upon  the  basis  of  an  actual  loan  of 
money,  and  subsequent  partial  payments  therefor  by  the 
bortbwer.  And  these  decisions  have  been  followed  con- 
sistently in  cases  arising  subsequently  in  that  State.* 

1  75  N.  C.  292.  Carolina,  in  Columbia  Building  and 
9  81  N.  C.  56.  Loan  Association  v.  Bellinger,  12 
8  See  Vann  and  wife  «.  The  Fay  Rich.  Eq.  124;  O'Neal,  C.  J.,  say- 
etteville  Building  and  Loan  Asso-  ing:  "How  the  contract  .  .  .  can 
ciation,  75  N.  C.  494;  Latham  and  he  anything  else  than  usurious,  .  .  . 
•wife  v.  Washington  Building  and  it  is  difficult  to  conceive.  Indeed  it 
Loan  Association,  77  N.  C.  145;  must  task,  and  has  tasked  human 
Hanner  et  al.  «.  The  Greensboro  ingenuity  in  every  tribunal  where 
Building  and  Loan  Association,  78  the  question  has  been  presented,  to 
N.  C.  188;  Hoskins  r>.  Mechanics'  find  the  reason  whereby  such  a  con- 
Building  and  Loan  Association,  84  tract  could  be  sustained."  And  ad- 
N.  C.  838;  and  see  Smith  and  wife  verting  to  the  dissenting  opinion  of 
«.  The  Mechanics'  Building  and  McDonald,  J.,  in  Building  Associa- 
Loan  Association,  73  N.  C.  372.  tion  v.  Richards,  21  Ga.  592  (ante, 
The  same  doctrine  was  held  in  South  §  346,  note),  he  approves  it,  say- 


§  349.]         LOANS   OB  ADVANCEMENTS  TO   MEMBERS.  343 

Decisions  in  Nebraska. 

§  348.  In  Nebraska,  the  cases  of  The  Lincoln  Building 
and  Savings  Association,  appellee,  v.  Graham,  appellant,1 
and  of  Same  v.  Benjamin  and  Benjamin,  appellants?  pro- 
ceed upon  a  similar  theory.  A  building  association,  it  is 
said,  incorporated  under  the  general  Incorporation  Laws  of 
Nebraska,  "  for  the  transaction  of  any  lawful  business,"  and 
having  the  power  to  "make  by-laws  not  inconsistent  with 
any  existing  laws,  for  the  management  of  its  affairs,"  has  no 
right,  by  any  device  whatever,  no  matter  how  ingenious,  to 
take  interest  beyond  the  maximum  allowed  by  the  general 
laws  of  the  State.  "  Now,  the  scheme  of  a  building  associa- 
tion, by  selling  shares  under  reservation  of  a  premium,  in- 
cluded in  the  nominal  amount  of  the  debt,  and  contracted  to 
be  repaid,  with  interest,  is  to  be  treated  as  a  mere  loan  of 
money,  and  is,  therefore,  affected  with  the  vice  of  usury." 

Decisions  in  Tennessee. 

§  349.  In  Tennessee,  in  Martin  v.  The  Nashville  Build- 
ing Association*  where  the  bond  was  drawn  for  the  pay- 
ment of  the  nominal  par  value  of  the  shares,  from  which  the 
premium  had  been  deducted,  by  paying  a  certain  amount, — in 
this  case,  one  per  cent,  per  month  until  it  should  be  satis- 
fied,— the  court  resolved  the  whole  transaction,  which  was 
similar  to  that  in  other  associations,  into  a  mere  loan,  declar- 
ing the  whole  scheme  a  shift  and  device  to  evade  the  law  of 
usury,  and  applying  to  the  building  association  Lord  Coke's 
warning :  "  To  them  that  lend  money  my  caveat  is,  that, 
neither  directly  nor  indirectly,  by  art,  or  cunning  invention, 
they  take  above  ten  in  the  hundred ;  for  they  that  seeke  by 
slight  to  creepe  out  of  these  statutes,  will  deceive  themselves 
and  repent  in  the  end." 

ing,  as  to  the  theory  of  partnership  even  a  partnership  fund.     It   wa* 

transactions  as  underlying  the  con-  the  taking  of  more  than  legal  inter- 

struction    of    building    association  est  for  the  forbearance  of  money." 

loiins,   "how  that  could  have  sane-  The  court  below,  which,  under  the 

tified  such  a  contract,  I  cannot  per-  English   and    Massachusetts 

ceive.     For  it  was  as  much  usury  had  held  the  transaction  to  be  legal 

to  receive  more  than  seven  per  cent,  and  valid,  was  reversed,  and  the  loan 

(referring  to  Silver  v.  Barnes,  supra)  declared  usurious, 

on  such  an  advance  as  upon  indi-  '  7  Neb.  173. 

vidual  funds.  .  .  .  For  it  still  was  •  Ib.  181. 

contaminated  by  usury,  if  it  was  s  2  Cold.  418. 


344  THE  LAW  OF  BUILDING   ASSOCIATIONS.      [CH. 

Decisions  in  Kentucky. 

§  350.  Similarly,  in  Kentucky,  in  Herbert  v.  The  Kenton 
Building  and  Savings  Association  of  Covington,1  where  it 
was  shown  that  borrowers  were  required  to  make  their  ob- 
ligations to  the  society  payable  in  a  certain  time,  for  the 
nominal  amount  of  the  advance,  the  premium  being  retained 
by  the  society,  and  to  pay  their  regular  dues  on  the  advanced 
shares,  and  interest  on  the  principal  monthly,  until  the 
general  fund  of  the  association  was  found  sufficient  to  pay  oif 
all  remaining  shares,  when  the  society  was  to  dissolve ;  the 
transaction  between  it  and  the  borrower  was  regarded  as  one 
in  which  he  released  all  claims  upon  the  association,  although 
remaining  a  member,  and,  consequently,  merely  as  a  usurious 
loan.  And  the  same  principle  is  reaffirmed  in  Gordon,  etc., 
v.  The  Winchester  Building  and  Accumulating  Fund  As- 
sociation? 

Decisions  in  Pennsylvania. 

§  351.  In  Pennsylvania,  too,  where,  under  the  statute,  the 
powers  and  privileges  of  building  associations,  as  to  the  res- 
ervations lawfully  to  be  made  upon  loans  to  members,  are 
more  sweeping  than  in  any  other  State,  the  English  doctrine 
is  emphatically  rejected. 

In  Bechtold  v.  Brehm*  the  member  had  received  an  actual 
advance  of  $1418,  executing  a  bond  and  mortgage  to  the  associa- 
tion, which  was  unincorporated,  for  $1800.  Upon  refusal  to 
pay  fines  and  dues,  the  association  declared  the  bond  forfeited, 
and  thereupon  caused  judgment  to  be  entered  upon  it.  In 
the  Supreme  Court,  Lowrie,  J.,  says  :  "  We  have  never  had  a 
case  like  this  before,  though  such  cases  are  not  unknown  in 
England.4  There  such  a  contract  was  enforced  at  law  and  in 
equity  as  a  security  for  the  payment  of  the  monthly  contribu- 
tions to  the  association.  In  the  present  case,  the  defendant  has 
been  treated  as  having  forfeited  his  membership  by  default  in 
paying  his  contributions,  and  has  been  required  to  stand  to  his 
bond  of  $1800  as  a  loan,  after  allowing  his  paid  contributions 
and  his  payment  of  interest  as  a  credit  thereon.  The  bond 
has  not  been  used  for  its  legitimate  purpose  of  enforcing  the 

1  11  Bush  296.  «  26  Pa.  St.  269. 

9  12  Bush  110.  4  Citing  the  English  cases. 


§  351.]         LOANS   OE  ADVANCEMENTS  TO   MEMBERS.  345 

contributions  of  the  defendant  as  a  member,  because  the  asso- 
ciation has  abandoned  that  purpose,  and  elected  its  alternative, 
by  depriving  the  defendant  of  his  membership,  and  of  all  the 
profits  of  their  seven  or  eight  years'  business.  We  are  there- 
fore prohibited  from  considering  this  as  a  case  of  composition 
by  anticipation  of  the  defendants'  future  share  of  the  common 
property,  and  must  treat  it  as  a  mere  loan ;  for  such  is  its  form, 
so  the  parties  have  treated  it,  and  as  such  alone,  since  the  for- 
feiture of  the  defendant's  membership,  can  it  be  enforced." 
This  was  the  case  of  an  unincorporated  building  association. 

In  Heiser  v.  The  William  Tell  Saving  Fund  Associa- 
tion,1 the  fact  of  incorporation  under  the  Act  of  1850,  which 
authorized  those  companies  to  give  preferences  to  their  mem- 
bers, under  such  conditions  and  regulations  as  they  should 
agree  upon,  was  not  held  to  legalize  the  contract,  which  was 
again  regarded  as  a  mere  loan. 

The  transaction  disclosed  in  the  Premium  Fund  Associa- 
tion's Appeal?  was  not  legitimately  a  building  association 
loan,  the  mortgage  being  executed  for  the  sum  of  $1000,  at  a 
rate  of  interest  of  19  mills  to  the  dollar  per  month,  to  be  de- 
ducted in  advance  for  the  whole  period  of  the  loan,  168  days. 
When  the  loan  became  due  it  was  renewed  by  the  borrower 
at  the  same  rate  for  six  months,  and  the  interest  was  paid  at 
the  time  of  renewal.  Nor  did  it  appear  that  the  borrower  be-; 
came  a  stockholder  at  all.  The  transaction  was,  therefore, 
treated  as  a  mere  loan. 

But  in  Kupfert  v.  Guttenberg  Building  Association? 
where  the  mortgage  was  written  for  a  year,  the  court, 
although  distinctly  recognizing  the  fact  that  these  mortgages 
were,  after  all,  not  intended  to  be  collected  during  the  run- 
ning of  the  association,  yet  followed  the  doctrine,  which  had 
already  become  familiar,  that  the  transaction  was  a  loan  only. 

In  Philanthropic  Building  Association  v.  McKnight* 
the  borrower  obtained  money,  at  28  per  cent,  premium,  and 
under  stipulation  for  the  return  of  a  definite  sum.  The  re- 
turn, however,  was  to  take  place  upon  regular  building  asso- 
ciation principles.  The  borrower,  desiring  to  repay  his  mort 

1  39  Pa.    St.    137;  see  S.    P.  in  »Ib.  156. 

Denny  v.  The  West  Philadelphia  » 30  Pa.  St.  465. 

Saving  and  Building  Ass'n,  Ib.  154.  *  35  Pa.  St.  470. 


346  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XII. 

gage  before  due,  agreed  with  the  building  association  that  it 
should  take  his  stock  at  the  amount  paid  in,  remit  ten  per 
cent,  from  the  nominal  amount  of  the  loan,  and  receive  the 
balance  in  cash.  In  a  suit  subsequently  brought  by  the  mem- 
ber to  recover  usury  paid,  the  transaction  was  treated  as  a 
mere  loan,  and  it  was  said  that  even  the  last  stage  of  it,  the 
withdrawal  of  shares  to  pay  up  the  mortgage,  could  not  be 
called  a  sale  of  the  stock  to  the  building  association  for  the 
balance  of  the  mortgage  loan,  after  deducting  payments  for 
principal  and  interest,  so  as  to  change  its  nature  from  a  mere 
loan. 

The  Act  of  1859  and  the  later  acts,  as  to  building  associa- 
tions incorporated  thereunder,  have  made  the  distinction  prac- 
tically unimportant,  so  far  as  the  questions  presented  in  cases 
arising  under  them  are  concerned,  by  defining  exactly  what, 
upon  such  loans,  could  be  recovered  by  the  association.  But 
wherever  cases  arose  in  which  loans  had  been  taken  from  un- 
incorporated building  associations,  or  such  as  did  not  appear 
to  be  incorporated  under  the  Act  of  1859,  the  principle  that 
the  transaction  is  to  be  regarded  as  nothing  more  nor  less  thai} 
a  loan,  is  either  expressly  asserted,  or  applied  in  its  results, 
being,  at  all  times  and  under  all  circumstances,  taken  to  be 
the  established  doctrine  in  Pennsylvania. 

Thus,  in  Jarrett  v.  Cope,1  the  cases  of  Bechtold  v.  Brehm 
and  Premium  Fund  Association's  Appeal  are  referred  to  as 
establishing  the  general  inapplicability,  in  Pennsylvania,  of 
the  doctrine  of  Silver  v.  Barnes,  and  other  English  cases. 
And  in  Rhoads  v.  Ilownerstown  Building  Association  *  and 
Link  v.  Germantown  Building  Association*  the  validity 
and  extent  of  the  contract  between  the  building  association 
which  lends,  and  the  member  who  borrows,  are  placed  en- 
tirely upon  statutory  authorization,  the  doctrines  of  partner- 
ship dealing,  etc.,  being  wholly  lost  sight  of. 

Decisions  in  Indiana. 

§  352.  In  Indiana,  the  premium  or  percentage  for  a  loan 
offered  by  the  association,  which  was  included  in  a  note  exe- 
cuted by  the  borrowing  member  to  the  association,  was  said 
not  to  be,  strictly  speaking,  "  interest  on  money,"  within  the 

1  -68  Pa.  St.  67.  *  82  Pa.  St.  180.  s  89  Pa.  St.  15. 


LOANS   OR  ADVANCEMENTS  TO  MEMBERS.  34? 

meaning  of  those  words  as  used  in  sec.  22,  art.  4,  of  the 
Constitution  of  Indiana,  which  prohibits,  inter  alia,  the  en- 
art  ment  of  local  or  special  laws  on  such  subjects.  This  bonus, 
or  percentage,  or  premium  was  merely  the  contract  price, 
agreed  upon  between  the  parties,  for  the  "  preference,"  which 
such  association  was  expressly  authorized  to  sell,  and  such 
member  authorized  to  buy,  and  was  not  interest  on  money. 
u  The  question  propounded  to  its  corporators,  or  the  members 
of  the  association,  was  practically  this,  '  How  much  will  you 
give  for  the  privilege  of  taking  this  loan  ? '  The  members 
of  the  association  were  under  no  compulsion,  moral,  legal,  or 
physical,  in  regard  to  any  such  loan ;  they  could  compete  or 
not  for  the  privilege  of  taking  the  loan,  at  their  own  free 
will  and  pleasure."  The  member  taking  the  loan  "  did  not 
pay  his  bid,  but,  in  lieu  thereof,  he  gave  his  note  for  the  full 
sum,"  of  the  nominal  loan.1  This  reasoning,  supposing  it  to 
have  been  sufficient  to  satisfy  the  conscience  of  a  court, 
certainly  recognized  nothing  in  the  transaction  but  a  lending 
and  a  borrowing  of  money. 

Decisions  in  Connecticut,  Iowa,  Ohio. 

§  353.  The  decisions  in  Connecticut,2  Iowa,*  and  Ohio,4 
do  not  expressly  touch  upon  this  question.  In  all  of  them, 
as  in  Pennsylvania,  the  statute  is  the  exact  measure  of  the 

1  McLaughlin  et  al.  «.  The  Citi-  "  It  matters  not  what  may  be  the 

zens'  Building  Loan   and   Savings  form  or  device  adopted,    if  more 

Association,    62    Ind.    264;    S.    P.  than   the  legal  rate  of  interest  is 

Shaffrey  v.  The  Workingmen's  Sav-  exacted  on  the  money  loaned,    it 

ings,    Loan  and  Building  Associa-  constitutes  usury."     "  Suppose  the 

tion,  64  Ind.  600.  transaction  had   been    as    follows: 

8  See  the  Mechanics'  and  Work-  That  the  defendant  borrowed  of  the 

ingmen's    Mutual     Savings    Bank  plaintiffs  $1000,  and  gave  his  obli- 

and  Building  Association  of  New  gation  therefor,  providing  h«-  was 

Haven  v.  Wilcox  et  al.,  24  Conn,  never  to  pay  the  principal,  but  was 

147.  to  pay  twenty-five  per  cent,  interest 

8  See  The  Hawkeye  Benefit  and  thereon  for  twenty  years.     Such  an 

Loan  Ass'n  v.  Blackburn,  48  Iowa,  obligation  would,  we  think,  be  usur- 

385;  Burlington  Mutual  Loan  Asso-  ious  on  its  face,  and  the  intent  or 

ciation  v.  Heider  et  al. ,  55  Ib.  424.  good  faith  of  the  transaction  would 

In  the  latter  case,  referring  to  the  be  immaterial."    Per  Seevers,  J. 
taking  of  interest  upon  the  premium         *  See   Hasrerman  et  al.    v.   The 

charged,  which  is  decided  to  be  il-  Ohio  Building  and  Savings  Asso- 

legal  and  usurious,  the  court  says:  ciation,  25  Ohio  St.  186. 


348  THE   LAW  OF  BUILDING   ASSOCIATIONS.       [CH.  XII. 

legitimacy  and  binding  extent  of  the  contract.  Only  under 
the  statute  can  it  be  enforced,  and  only  so  far  as  it  is  in 
accordance  with  the  statute. 

Result  of  Examination  of  all  Decisions. 

§  354.  Such  being  the  conflicting  results  of  judicial  inter- 
pretation of  contracts  differing  very  slightly,  and  in  points 
essentially  immaterial,  from  one  another,  it  is  impossible  that 
the  truth  should  be  found  in  either  one  of  the  extremes 
represented.  It  must  not  be  forgotten  that  a  distinction 
between  such  transactions  in  which  the  return  of  the  sums 
advanced  does  not,  upon  the  face  of  the  contract,  appear  to 
be  an  element  in  it,  but  which  seem  to  look  merely  towards 
the  payment  of  dues,  including,  or  with  the  addition  of,  in- 
terest or  redemption  money,  to  the  end  of  the  society's  run- 
ning ;  and  such,  in  which  an  actual  repayment  is  stipulated; 
— although  obvious  enough,  yet  lacks  not  only  reason,  but  also 
the  support  of  the  very  authorities  upon  which  the  theory  oi 
a  partnership  dealing  is  grounded.  This  theory  comes  to  nl 
from  England,  and  has  received  neither  the  strength  of  addi- 
tional argument,  nor  the  benefit  of  further  elucidation  from 
the  reasonings  of  our  courts.  In  England,  no  such  distinc- 
tion is  hinted  at.  On  the  contrary,  it  has  been  seen,  that  the 
very  first  case,  that  of  Silver  v.  Barnes^  was  one  in  which 
the  borrowing  member  had  given  a  note  for  the  amount 
advanced,  payable  on  demand,  with  interest ;  in  Burbidge  v. 
Cotton* a  mortgage  had  been  given  for  the  payment  of  8s.. 
including  redemption-money,  for  100  months ;  whilst  in 
Seagrave  v.  Pope'  the  deed  merely  recited  the  amount  re- 
ceived by  the  member,  and  stipulated  for  the  payment  of 
dues  and  "  redemption-money  or  interest,"  during  the  life  of 
the  association.  Yet  upon  all  these  transactions,  including 
the  essence  of  every  variety  of  form  conceivable  in  building 
association  loans,  the  same  construction  was  placed  by  the 
courts,  recognizing  the  fact  that  they  are  all,  in  truth,  the 
same,  and  that  any  one  of  them  may  be  followed  consistently 
with  the  logic  of  the  dealings,  the  nature,  and  the  purpose  of 
these  institutions.  It  is  true  that  the  terms  of  a  statute  under 
which  a  building  association  has  its  being  may  prescribe  the 

1  See  ante,  §  338.  *  See  ante,  Ib.  *  See  ante,  Ib. 


§  355.]      LOANS  OK  ADVANCEMENTS  TO  MEMBERS.  349 

one  or  the  other  of  these  forms,  and  thus  render  the  remain- 
ing ones  illegal,  so  far  as  it  is  concerned.  This  is,  indeed, 
the  case  in  some  States ;  *  but  the  identity  of  all,  in  sub- 
stance, is  not  thereby  affected. 

§  355.  Whilst,  therefore,  it  is  impossible  to  exclude  the 
force  of  this  doctrine,  as  pointing  out  an  essential  ingredient 
in  building  association  loans  to  members,  there  is  still,  on  the 
other  hand,  a  peculiarity  which  cannot  be  overlooked,  in  con- 
nection with  the  foregoing  review  of  decisions.  It  is  this, 
that,  with  the  exception  of  Massachusetts  and  New  Hamp- 
shire, where  alone  the  partnership  theory  seems  consistently 
carried  through,  the  right,  independently  of  statutory  sanc- 
tion, of  any  association,  incorporated  or  otherwise,  to  deal 
with  its  members  upon  this  peculiar  partnership  basis,  has 
never  been  expressly  recognized,  but  frequently  explicitly 
denied.  In  New  York,  the  doctrine  of  the  English  cases  was 
distinctly  held  inapplicable  to  an  unincorporated  building  as- 
sociation.* In  Maryland,  a  corporation  which  made  its  loans . 
to  members  in  the  approved  form  of  building  association 
loans,  but  whose  aims  and  nature  did  not  bring  it  properly 
within  the  statute  as  a  building  association,  was  not  allowed 
to  enforce  the  reservations  lawfully  permitted  to  such  insti- 
tutions.' The  same  doctrine,4  as  well  as'the  inability  of  un- 
incorporated building  associations  to  claim  the  powers  as  to 
such  reservations  conceded,  to  those  properly  incorporated 
and  standing  under  the  protection  of  the  statute,6  is  estab- 
lished in  Pennsylvania ;  whilst  in  all  those  States,9  as  well  as 

1  See  post,  §§  420-422,  433-434.  «  See  Second  Manhattan  Build- 

9  Melville  v.  The  American  Bene-  ing  Association  v.  Hayes,  4  Abb. 

fit  Building  Association  et  al.,  83  App.  Dec.  183;  2  Keyes,  192;  Me- 

Barb.  103.  chanics'    Building    Association    t. 

3  Williar  v.  The  Baltimore  Butch-  Stevens  et  al.,  5  Duer,  676;  Franz 
ers'  Loan  and  Annuity  Association,  v.  The  Teutonia  Building  Assocw- 
45  Md.  546.  tion  No.  2,  24  Md.  259;  Lord  and 

4  Jarrett  v.  Cope,  68  Pa.  St.  67;  Robinson  v.  Essex  Building  AMO 
Kupfert  v.  Guttenberg  Building  As-  ciation  No.  4,  37  Id.  320;  Morrison 
sociation,   30    Id.    465;  Rhoads  v.  et  al.,  Rec'rs,  v.  Dorsey,  48  Id.  461; 
Hoernerstown  Building  Association,  Workingmen's   Building    Associa- 
82  Id.  180.  tion  v    Coleman,  89  Pa.   St.   428; 

1  Link  v.  Germantown  Building  Becket  v.  Uniontown  Building  As- 
Association,  89  Id.  15;  and  seecases  sociation,  88  Id.  211;  and  see  post, 
in  preceding  note.  cases  noticed  in  Ch.  xix. 


350  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.   XII. 

in  Arkansas,1  Connecticut,9  Georgia,"  Indiana,4  Nebraska,* 
New  Jersey,*  and  Ohio,7  the  attempt  has  been  made  to  show 
that  the  building  association  suing  upon  the  contract  with  its 
borrowing  member,  was  not,  in  truth,  an  incorporated  build- 
ing association  under  the  statute,  and  hence,  not  entitled  to 
enforce  it  according  to  its  terms.  Yet,  if  the  partnership 
doctrine  is  exclusively  to  govern  the  construction  of  the  ad- 
vancements made  by  building  associations  to  their  members, 
that  is,  at  least,  equally  applicable  to  unincorporated  societies, 
as  it  is  held  to  be  in  Massachusetts  8  and  New  Hampshire,' 
and  might  be  recognized  in  such  as  are  incorporated  under 
charters  authorizing  them  to  do  business  in  a  manner  similar 
to  that  of  building  associations,  although  the  purposes  of  their 
creation  do  not  permit  them  to  be  strictly  classed  as  such. 

§  356.  Again,  it  is  noticeable,  that,  under  all  the  statutes, 
the  extent  of  the  reservations  upon  advancements  by  the 
building  association  to  its  members,  which,  upon  the  theory 
of  mere  partnership  dealing,  might  fairly  be  left  to  the  dis- 
cretion and  agreement  of  the  contracting  parties,  is  not  only 
measured  exactly  by  the  letter  of  the  law,  but  this  is,  in  fact, 
strictly  construed  in  limiting  the  lender. 

Thus,  it  is  said  in  New  York,10  that  a  mortgage  taken  by 
a  building  association  is  a  security  for  the  payment  of  money 
only  within  the  statute ;"  and  in  Maryland,1*  that  it  is  oper- 
ative only  so  far  as  it  conforms  with  the  statute  and  the  by- 
laws under  the  same.  This  principle  is  asserted,  in  one  form 

1  Odd  Fellows'  Building  Associa-  6  Hoboken  Building  Association 

tion  «.  Hogan,  28  Ark.  261.  v.  Martin,  2  Beas.  428. 

*  People's    Savings     Bank    and  7  Hagerman  et  al.  v.  The  Ohio 

Building  Association  v.  Collins,  27  Building  and  Savings  Association, 

Conn.  145;  West  Winsted  Savings  25  Ohio  St.  186. 

Bank  and  Building  Association  v.  8  See  ante,  §  341. 

Ford,  Ib.   282;  Same  v.  Rice,  Ib.  •  See  ante,  §  344. 

293.  10  Franklin  Building  Association 

3  Pattison  t>.  The  Albany  Build-  v.  Mather,  4  Abb.  Pr.  273. 

ing  and  Loan  Ass'n,  63  Ga.  873.  »  Hamilton  Building  Association 

4  McLaughlin  and  wife   v.  Citi-     v.  Reynolds,  5  Duer,  671;  Franklin 
zens'  Building  Ass'n,  18  Ind.  237.        Building  Association  v.  Mather,  4 

8  Lincoln  Building  and   Savings  Abb.  Pr.  273. 

Association  ».  Graham,  7  Neb.  173;  "  Shannon  v.  The  Howard  Mutual 

Same  v.  Benjamin  and  Benjamin,  Building  Association  of  Baltimore, 

Ib.  181.  36  Md.  383. 


§  356.]         LOANS  OB  ADVANCEMENTS  TO   MEMBERS.  351 

<>r  another,  in  nearly  every  State,1  clearly  demonstrating  that, 
independently  of  legislative  sanction,  the  contract  between 
the  society  and  its  borrowing  member  is  not  such  an  one,  no 
matter  what  may  be  said  of  its  partnership  character,  as  to 
commend  itself  to  the  unhesitating  approval  of  the  judicial 
mind  ;  whilst,  at  the  same  time,  its  complicated  nature,  inti- 
mately joining  in  equal  parts  that  which,  as  between  private 
parties,  would  be  legal,"  and  that  which  would  be  there  ille- 
gal, is  such  as  to  induce  a  court  to  subordinate  the  one  ele- 
ment to  the  other  in  favor  of  effecting  the  expressed  intention 
of  the  Legislature,  to  the  precise  extent  and  in  the  precise 
form  indicated  by  it,  where  such  subordination  is  necessary 
in  order  to  accomplish  the  purposes  and  legalize  the  opera- 
tions clearly  contemplated  by  the  enactment.  Where,  how- 
ever, the  latter,  as  construed  by  the  courts,  does  not  appear 
to  aim  at  the  practical  results  flowing  from  the  methods  ob- 
served in  building  association  loans ; a  or  where  there  is  no 
statutory  sanction  at  all  within  whose  protection  the  society 
can  bring  itself  and  its  contract, — there  no  theory  of  partner- 
ship dealings,  and  no  complication  or  veiling  of  the  transac- 
tion will  hold  out  to  remove  the  fact  of  a  substantial  loan  upon 
apparently  extraordinary  reservations.  The  doctrine  in  Mas- 
sachusetts and  New  Hampshire,  extending  the  partnership 
theory  and  its  consequences  to  unincorporated  building  asso- 
ciations, must,  therefore,  be  regarded  as  an  anomaly,  resulting 
from  the  logically  consistent  application  of  a  rule  which  loses 
sight  of  the  loan  element  in  the  transaction  altogether ;  which 
has  been  invoked  to  answer  temporary  purposes  and  explain 
isolated  incongruities ;  which  expresses  part  of  a  truth,  that 
may  or  may  not  become  decisive,  accordingly  as  there  is  or  is 
not  a  legislative  intent  to  be  served ;  but  which,  regarded  as 
an  exclusively  governing  axiom,  with  its  legitimate  corollaries, 
is  simply  impossible. 

1  See  post,  §  420,  also  §§  421-422,  the    contract  is    not  usurious,   al- 

433-434.  though,  in  addition  to  regular  inter- 

9  Where  the  return  of  money  ad-  est,  the  party  advancing  the  money 

vanced  is  made  dependent  upon  the  is  entitled  to  share  in  the  profits  of 

event  of  that  amount  being  realized  the  adventure.     Brigham  v.  Dana, 

in  a  contemplated  joint  adventure,  29  Vt.  1. 
over  and  above  losses  and  expenses,         *  See  ante,  §§  346-350. 


352  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  XII, 

Two  Cardinal  Principles  Concerning  Loans  and  Borrowers. 

§  357.  There  are  two  principle!  in  the  law  of  building  as- 
sociations, wl.ich  govern  all  the  rights  and  liabilities  of  bor- 
rowing members,  and  condition  and  comprehend  the  entire 
system  of  rules  applicable  to  these  loans  or  advancements,  and 
to  the  duties  and  relations  reciprocally  resulting  to  the  society 
and  to  the  borrower,  as  they  are  laid  down,  with  astonishing 
unanimity,  by  the  most  respectable  courts  of  the  United  States 
and  of  England,  although  proceeding  upon  different  paths  of 
reasoning,  and  announcing  us  their  starting  points  the  most 
contradictory  positions.  The  one  has  already  been  exam- 
ined : '  it  is,  that  a  member  of  a  building  association,  becom- 
ing a  borrower,  continues  to  be  a  member.  The  other  is  the 
one  just  discussed,  that  the  transaction  of  loan  or  advance- 
ment from  the  society  to  its  member  partakes  equally  of  the 
character  of  a  loan  and  of  a  dealing  in  a  partnership  fund, 
either  element  giving  its  color  to  the  transaction  accordingly 
as  the  form,  substance,  and  results  of  the  same  are  or  are  not 
within  the  intention  and  protection  of  legislative  enactment ; 
and  as  such  declared  purpose  may  best  be  served  by  the  pre- 
dominance of  the  one  or  the  other ;  neither  element,  however, 
at  any  time,  operating  to  the  entire  overshadowing  or  exclu- 
sion, nor  withdrawing  itself  from  the  modifications  conse- 
quent upon  the  presence,  as  part  of  it,  of  the  other. 

It  is  clear,  from  this  latter  proposition,  (1)  that,  neither 
independently  of  the  statute  nor  beyond  the  manner  and  ex- 
tent prescribed  by  it,  and  the  rules  adopted  under  it,  can  the 
contract  between  the  society  and  its  borrowing  member  have 
any  validity ;  and  (2)  that,  where  it  subsists  as  a  valid  con- 
tract, it  is  invariably  made  up  of  those  two  essential  and  nicely 
balanced  elements,  that  of  a  loan,  and  that  of  a  venture  with 
partnership  funds. 

1  See  ante,  §§  146-148. 


§  358.  J       INCIDENTS  TO    LOANS  OR  ADVANCEMENTS. 


353 


CHAPTER  XIII. 

INCIDENTS   TO    LOANS    OR   ADVANCEMENTS. 

§  858.  Usury  may  become  an  element  in  a  building  association  loan. 

§  359.  Right  of  borrower  to  recovery  of  usury.     Qualifications. 

$  361.  Rule   as  to  recovery  of  usury  paid,  in  North  Carolina  ana 

Georgia  where  borrowers  are  members. 

§  362.  Limitation  in  suits  for  recovery  of  usury. 

§  363.  Who  may  set  up  the  defence  of  usury. 

§  366.  Usury  merged  in  judgment  cannot  be  recovered. 

§  367.  Plea  of  usury  must  conform  to  statute. 

§  368.  Charges  incidental  to  negotiation  of  loan  when  not  usurious. 

§  369.  Lawful  incidents  to  building  association  mortgage. 

§  371.  Significance  of  stipulation  for  stock-payments  or  dues. 

§  373.  "Dues"  practically  including  interest,  or  redemption  money. 

§  374.  Right  and  extent  of  interest  reservation. 

§  375.  Interest,  in  any  form,  ceases  upon  reimbursement  of  society. 

§  377.  Running  of  interest  not  suspended  by  bringing  and  during  pen- 

dency  of  suit;  but  by  tender. 

6  378.  Premiums. 

§  379.  Fines. 

§  380.  Security — its  nature  and  kind. 

§  382.  Joint  security  of  members  and  outsiders. 

§  383.  Reservations  legalized  in  the  several  States. 

§  384.  "Loan"  construed  to  mean  "  amount  actually  advanced." 

§  386.  Binding  force  of  contract  of  loan,  etc.,  made  in  pursuance  of 

charter  and  statutory  powers. 

§  387.  Practical  results  of  building  association  loans. 

Usury  may  Become  an  Element  in  a  Building  Association  Loan. 

§  358.  It  follows,  as  a  necessary  result  of  the  proposition, 
that  the  binding  extent  and  legitimacy  of  the  contract  be- 
tween the  building  association  and  its  borrowing  member, 
partaking  so  largely  of  the  nature  of  a  loan,  is  referable,  in 
form  and  substance,  to  the  provisions  of  the  statute  under 
which  the  society  is  incorporated,  and  its  rules  adopted  in 
accordance  with  the  same,  that  usury,  as  a  possible  incident 
to  the  contract,  is  by  no  means  entirely  excluded.  Usury  is 
defined  to  be  "  the  taking  of  more  interest  for  the  use  of 


854  THE   LAW  OF  BUILDING  ASSOCIATIONS.     [CH.  XIII. 

money  than  the  law  allows," !  and  it  is  said  that  the  requisites 
to  form  an  usurious  contract  are,  (1)  a  loan,  either  express  or 
implied ;  (2)  an  understanding  that  the  money  lent  shall  or 
may  be  returned ;  and  (3)  that,  in  effect,  a  greater  rate  of 
interest  than  is  allowed  by  statute  shall  be  paid.*  The  man- 
ner, form,  or  pretence  under  which  this  is  done  is  entirely 
immaterial.  It  is  the  business  of  the  courts  to  analyze  a 
transaction,  and  lay  bare  its  usurious  nature,  however  it  may 
be  disguised  and  hidden.3  Equally  immaterial  it  is,  whether 
the  usurious  reservation  be  stipulated  for  in  the  instrument 
securing  the  principal,  or  by  a  separate  written  or  oral  con- 
tract.4 If  the  statute  makes  the  usurious  contract  void,  the 
instrument  creating  it  will  be  void  ab  initio,  even  in  the 
hands  of  an  innocent  holder.6  And  a  security  substituted  for 
one  which  is  usurious,  is  equally  void  with  it.'  But  a  new 
security  being  given  to  a  bona  fide  holder,  for  value,  of  a 
promissory  note  tainted  with  usury,  constitutes  a  new  trans- 
action, and  the  usury  on  the  first  note,  for  which  the  second 
was  given,  does  not  affect  the  latter.7 

Right  of  Borrower  to  Recover  Usury.    Qualifications. 

§  359.  On  the  question  of  the  right  of  the  borrower  upon 
usury  to  recover  the  money  paid  by  him  in  excess  of  legal 
interest,  Strong,  J.,  in  Philanthropic  Building  Associa- 
tion v.  McKnight*  reviews  the  course  of  decisions.  The 
earliest  English  cases'  denied  the  party  paying  the  usurious 

1  3  Pars.,  Contr.,  p.  *107.  contract  itself  is  free  from  it,  and  a 

*  Lloyd  0.   Scott,  4  Pet.  (U.  S.)  subsequent  contract,  in  payment  of 

205,  overruling  De  Wolf  n.  Johnson,  the  first,  be  usurious,  it  is  only  the 

10  "Wheat.  367.  second  which  becomes  tainted,  and 

8  3  Pars.,  Contr.,  p.  *133;  2  Ib.  p.  the  debt  may  be  enforced  as  stated 

*385;  Tyson  v.  Rickard,  3  Hill  and  in  and  under  the  terms  of  the  first 

J.  (Md.)  109;  Stockettfl.  Ellicott,  3  contract.     See  Ely  v.   McClung,  4 

Gill  and  J.  (Md.)  123;  Trumbo  v.  Port.  (Ala.)  128. 

Blttzard,  6  Id.  18.    In  Beete  v.  Bid-  6  3  Pars.,  Contr.,  p.  *117. 

good,  7  B.  and  C.  453,  Tenterden,  •  Ib.,  p.  *119. 

C.  J.,  says  the  court  must  "  look,  T  Cassebeerc.  Kalbfleisch,  4N.  Y. 

not  at  the  form  and  words,  but  at  Weekly  Dig.  586. 

the  substance  of  the  transaction."  8  35  Pa.  St.  470. 

4  3  Pars. ,  Contr. ,  p.  *113.    It  is  the  »  See  Tomkins  v.  Barnett,  1  Salk. 

contract  as  a  whole,  not  the  separate  22  (' '  long  exploded :  "  Mansfield,  in 

pieces  of  paper,  that  suffers  from  Cowp.  200;  see  next  note), 
the  taint  of  usury.     But  where  the 


§  360.]       INCIDENTS  TO   LOANS  OR  ADVANCEMENTS.  355 

interest  the  right  subsequently  to  recover  it,  as  being  in  pari 
delicto,  and  because  volenti  nonfit  injuria.  Lord  Mansfield 
denied  this  doctrine  at  an  early  date.1  Later,  a  distinction 
was  drawn  between  transactions  under  statutes  enacted  on 
grounds  of  general  policy,  where  each  party  violating  the  law 
is  held  in  equal  fault ;  and  transactions  under  the  usury  laws, 
enacted  to  protect  weak  and  needy  men  from  being  "  over- 
reached, defrauded,  and  oppressed."  To  the  latter,  the  law 
does  afford  relief.  It  regards  the  lender  as  the  oppressor, 
and  the  borrower  as  the  oppressed.2  No  other  duress  or 
oppression  has  been  held  necessary  to  be  shown,  in  order  to 
entitle  the  borrower  to  recover,  than  such  as  is  involved  in 
the  act  itself  of  taking  the  money  under  an  usurious  contract. 
These  statutes  regard  the  lender  alone  as  the  wrongdoer,  the 
borrower  as  the  victim.  Hence  the  payment  of  usurious 
interest  is  not  such  a  voluntary  payment  as  will  entitle  the 
receiver  to  retain  it ;  but  it  may  be  recovered  by  action  at 
the  suit  of  the  borrower  who  paid  it.3  So  it  is  said  in 
Georgia  that  usury  voluntarily  paid  may  be  recovered  back 
under  the  common  law  and  the  Code  of  that  State.4 

§  360.  But  usurious  interest  collected  or  paid  upon  lawful 
process  of  execution  cannot  be  recovered  back.  The  remedy 
in  such  case  is  by  application  to  court  to  open  the  judgment.* 
And  in  Maryland,  where  there  has  been  a  deliberate  settle- 
ment, in  pursuance  of  which  the  borrower  has  paid  to  the 
lender  an  amount  in  excess  of  lawful  interest,  if  there  was  no 
compulsion  or  duress,  and  full  knowledge  of  the  facts  and 
circumstances  under  which  the  amount  was  demanded,  no  ac- 
tion will  lie  to  recover  back  the  amount  thus  usuriously  paid, 
although  the  payment  was  made  under  protest.' 

1   Clarke  v.   Shee  and  Johnson,  and  Building  Association,  42  Ga. 

Cowp.  197.  451. 

s  See  Browning  D.  Morris,  Cowp.  B  Fed.  Insurance  Co.  v.  Robinson, 

790.     See  also  Briggst>.  Thompson,  8  N.  Y.  Weekly  Dig.  481. 

20  Johns  (N.  Y.),  294;  Thomas  v.  «  Await  v.  Eutaw  Building  Asso- 

Shoemuker,  6  W.  and  S.  (Pa.)  183.  ciation  No.  4,  84  Md.  435.    The  Act 

J  Philanthropic    Building    Asso-  of  1876,  Ch.  858,  in  that  State,  barred 

ciation  v.   McKnight,   supra.     See  the  right   of   recovery  of    money 

also  Building  Associations.  Ellsler,  usuriously  paid,  where  the  transac- 

6  Pliilu.  (Pa.)  6.  tion  had  been  closed  and  finally  set- 

4  Parker   v.    The    Fulton    Loan  tied  by  the  parties,  and  the  debt 


356  THE   LAW   OF   BUILDING   ASSOCIATIONS.      [CH.   XIII. 

So,  too,  it  is  said  in  Georgia,  that,  if  a  contract  clai:iif<l 
by  one  of  the  parties  to  be  usurious,  and  by  the  other  not,  is 
compromised  and  settled  between  them — the  question  of  dis- 
pute as  to  the  usury  forming  a  distinct  item  of  the  settlement 
— this  is  an  accord  and  satisfaction,  even  as  to  the  usury,  and 
the  money  paid  therefor  cannot  be  recovered  back.1  In  like 
manner,  where  an  account  is  stated  by  the  building  associa- 
tion creditor,  and  the  debtor  gives  his  promissory  notes  in 
settlement,  being  grossly  negligent  in  omitting  to  inform  him- 
self concerning  the  elements  of  the  account ;  the  fact  that  it 
actually  embraced  interest  or  usury  which  he  was  not  legally 
liable  to  pay,  is  not  such  an  imposition  upon  him  as  will  en- 
title him  to  open  the  settlement  on  the  ground  of  fraud.* 
But  where  there  have  been  no  such  laches  on  the  part  of 
the  debtor,  a  mere  compromise  and  settlement  of  the  debt, 
without  distinct  reference  to  the  dispute  as  to  the  illegality 
of  the  contract,  is  not  a  bar  to  a  suit  to  recover  the  usury 
paid.8 

Rule  as  to  recovery  of  usury  paid,  in  North  Carolina  and   Georgia 
where  borrowers  are  Members. 

§  361.  With  particular  reference  to  members  borrowing 
from  building  associations,  the  courts  of  North  Carolina  and 
Georgia  seem,  however,  to  lean  to  a  somewhat^tricter  doctrine 
as  regards  the  right  of  the  borrower  to  recover  what  he  has 
paid  in  excess  of  legal  interest.  In  the  former  State,  it  is  said 
that  the  law  will  not  aid  a  plaintiff  seeking  to  recover  interest 
usuriously  paid,  where  both  he  and  the  defendant  are  in  pan 
delicto.  Hence,  where  plaintiffs,  who  were  members  of  a 
building  association  and  had  paid  usurious  interest  upon 
money  borrowed  from  it,  endeavored  to  recover  it  back  by 
suit,  they  were  not  held  entitled  so  to  do.  The  reasoning 
upon  which  this  decision  is  based  is  this : — If,  at  any  time, 
they  had  repudiated  the  building  association,  and  the  latter 

paid  and  satisfied.     Second  German         '  Parker  v.  The  Fulton  Loan  and 
American  Building  Association  of  Building  Association,  46  Ga.  166. 
Baltimore  v.  Newman,  50  Md.  62,         *  Pattisou  v.  The  Albany  Build- 
declaring  that  act  constitutional,  and  ing  and  Loan  Association,  63  Ga. 
apparently  to  that  extent  overrul-  373. 

ing  Scott  v.  Leary,  34  Md.  589,  and         3  Parker  v.  The  Fulton  Loan  and 

Williar's  App.,  45  Id.  546.  Building  Association,  ubi  supra. 


§  363.]        INCIDENTS   10   LOANS  OB  ADVANCEMENTS.  35? 

had  sought  the  aid  of  the  court  to  enforce  the  contract,  the 
court  would  have  refused  its  assistance.1  But  whatever  had 
been  executed,  both  parties  being  in  pari  delicto,  and  the 
plaintiffs  not  having,  in  reality,  made  these  payments  under 
any  mistake  of  fact,  the  court  would  not  undo  the  transaction. 
"  Whatever  the  'association  was,  they  were,  for  they  were 
parts  and  parcels  of  it,  and  the  court  will  no  more  aid  them 
against  the  association,  than  it  would  have  aided  the  latter 
against  them."4  In  Georgia,  again,  the  peculiar  relation  of 
the  complaining  borrower  in  a  building  association  gave  rise 
to  the  following  observations :  "  In  such  a  scheme  as  this,  the 
great  element  of  usury  is  wanting,  to  wit,  oppression,  ad- 
vantage taken  by  one  of  the  necessities  of  another,3  the  per- 
son getting  the  money,  in  this  case,  being,  in  fact,  interested 
himself  in  having  the  sales  as  high  as  possible.  To  permit 
the  usurer  himself  to  set  up  the  usury,  after  the  contract  has 
been  executed,  would  be  contrary  to  all  principle.  The  per- 
son wronged  is  allowed  to  do  so,  but  not  the  wrongdoer,  and 
if  the  plaintiff  here  recovers,  he  will  recover  a  part  of  the  ad- 
vantage which  came  to  himself,  for  the  high  rates  at  which 
others  sold  their  interest  in  the  ultimate  dividend."  * 

Limitation  in   Suits  for  Recovery  of  Usury. 

§  362.  Where  the  general  usury  law  of  the  State  fixes  a 
certain  time  within  which  actions  to  recover  money  usuriously 
paid  shall  be  instituted,  suits  against  building  associations  to 
recover  payments  made  to  them  in  excess  of  legal  interest 
must  be  brought  within  those  limits.* 

Who  may  Set  Up  Defence  of  Usury. 

§  363.  Where  usury  avoids  the  contract,  the  plea  of  usury 
as  a  defence  to  the  enforcement  of  a  contract  is  available  be- 

1  Mills   et    al.  v.   The  Salisbury  duress  and  oppression,  further  than 

Building  and  Loan  Association,  75  is  involved  in  the  receiving  a  loan 

N.  C.  292.  at  usurious  interest. 

1  Latham  and  -wife  v.  The  Wash-  4  Parker  v.  The  Fulton  Loan  and 

ington  Building  and  Loan  Associa-  Building  Association,  ubi  supra. 

tion,  77  N.  C.  145.  5  Maule  ».  Building  Association, 

8  See  ante,  §  359,  and  Strong,  J.(  5  Phila.  (Pa.) 421;  thus,  in  Pennsyl- 

in  Philanthropic  Building  Associa-  vania,   under  the  Act  of  28  May. 

tion  v.  McK night,  35  Pn.  St.  470,  1858,  within  six  months, 
that  there  need  be  no  evidence  of 


358  THE   LAW    OF   BUILDING   ASSOCIATIONS.      [CH.  XIII 

tween  privies  only.1  The  guarantor  of  a  debt  may  set  it  up,* 
whilst,  where  the  borrower  delegates  one  who  is  debtor  to 
him,  to  pay  the  debt,  the  delegated  debtor  cannot  set  this  up 
defence,  and  plead  the  usury  by  which  he  was  not  affected.* 
But  the  vendee  of  property,  subject  to  a  mortgage  which  was 
usurious,  cannot  set  up  that  fact  as  a  defence  against  its  en- 
forcement.' But  when  N.  executed  a  mortgage  to  secure  an 
usurious  loan,  subsequently  sold  the  property  subject  to  the 
mortgage,  and  finally  bought  it  back,  the  same  not  being  made 
subject  to  the  mortgage  in  the  deed,  in  an  action  to  foreclose, 
it  was  held  that  N.  was  "  the  borrower,"  had  never  been  re- 
leased from  his  obligation  as  such,  and  was  entitled,  upon 
proof  of  usury,  to  a  judgment  avoiding  the  mortgage  al- 
together.6 

§  364.  But  whether,  in  general,  a  stranger  to  the  original 
transaction,  becoming  the  owner  of  property  upon  which 
rests  a  mortgage  given  upon  usurious  reservations,  is  entitled 
to  defend  against  it  on  the  ground  of  usury,  depends  entirely 
upon  whether  the  statute  under  which  the  defence  is  set  up, 
limits  the  same  to  the  original  parties,  the  borrower  and  the 
lender,  or  whether  it  extends  itself  to  all  others  interested  ; 
whether  the  statute  gives  the  right  to  recover  or  defalc,  or 
whether  it  prohibits  the  lender  from  retaining.  Where  the 
statute  applies  only  to  the  parties  to  the  transaction,  a  subse- 
quent creditor  (or  holder  of  the  property)  cannot  attack  the 
claims  on  that  ground,9  unless  the  taking  of  the  usury  amount 
to  a  fraud,  not  upon  the  debtor,  but  upon  subsequent  mort- 
gagees, judgment  creditors,  or  such  as  become  purchasers  of 
the  property  encumbered  at  sheriff's  sale.7  Where,  however, 

1  8  Pars.,  Contr.,  p.  *120.  Co,  e.  Nelson  et  al.,  6  N.  Y.  Week- 

9  Huntress  v.  Patten,  20  Me.  28;  ly  Dig.  145. 

Harrison  v.  Hanuel,  5  Taunt.  784;  •  Miners'  Trust  Co.  Bank  ».  Rose- 

1    Engl.   C.   L.   Rep.   263;    Gray's  berry,   81   Pa.  St.  309;  Appeal  of 

Ex'rs  «.  Brown,  22  Ala.  262.    But  Second  National  Bank  of  Titusville, 

see    contra   Laraoille   County    Na-  85  Id.  528,  being  .subsequent  to  the 

tional  Bank  v.  Bingham,  50  Vt.  105.  change  made  in  Pennsylvania  by  the 

3  3  Pars.,  Coutr.,  p.  *122.  Act  of  28  May,  1858. 

4  Mechanics'  Bank  v.  Edwards,  1  '  See  cases  in  note  above  ;  but 
Barb.  271 ;  Sands  v.  Church,  6  N.  the  fact  of  usury  does  not  necessar- 
Y.  347.  ily  make  a  fraud;  Good  v.  Grant,  76 

6  Knickerbocker   Life  Insurance     Pa.  St.  52. 


§  365.]        INCIDENTS   TO    LOANS   OB   ADVANCEMENTS. 


359 


the  policy  of  the  law  is  different,  extending  the  right  to 
other  parties  interested,  the  purchaser  at  sheriff's  sale  may- 
take  advantage  of  usury  in  a  mortgage  of  prior  date  to  the 
judgment  upon  which  his  execution  issued.1 

§  365.  But  if  it  appears  that  a  purchaser  bought  ex- 
pressly subject  to  an  encumbrance  which  was  tainted  with 
usury,  and  that  the  nominal  amount  of  such  incumbrarice  had 
entered  into  and  formed  part  of  the  price,  or  consideration, 
then,  being  by  no  possibility  prejudiced  thereby,  he  is  not 
allowed  to  set  up  the  usury  in  reduction  of  the  amount  ap- 
pearing to  be  due  on  the  face  of  the  encumbrance."  But  the 


1  As  illustrating  this  principle, 
see  Lloyd  «.  Scott,  4  Pet.  (U.  S.) 
205;  Kupfert  v.  Guttenberg  Build 
ing  Association,  30  Pa.  St.  465; 
Hughes's  App.,  Ib.  471;  Fisher  v. 
Kahlnan,  3  Phila.  (Pa.)  213;  Build- 
ing Association  ®.  O'Connor,  Ib. 
453  [where  subsequent  judgment 
creditors  were  held  entitled  to  im- 
peach a  mortgage  for  usury  before 
an  auditor] ;  Post  v.  Bank  of  Utica, 
7  Hill  (N.  Y.),  391 ;  NisbetttJ.  Walk- 
er, 4  Ga.  221;  Thorn  v.  Doub,  8 
Gill  (Md.),  1;  Cummins  v.  Evir,  2 
Halst.  Ch.  (N.  J.)  73;  Pinnell  t>. 
Boyd,  6  Stew.  (N.  J.)  190;  Brolasky 
t>.  Miller,  1  Stock.  (N.  J.)  807;  and 
see,  also,  Link  n.  Germantown 
Building  Association,  89  Pa.  St.  15 
(A.  D.  1879)  in  which  the  terre-ten- 
ant  who  purchased  the  mortgaged 
premises  at  sheriff's  sale,  and  was 
allowed  to  defend  against  the  claim 
of  the  association  on  the  mortgage, 
was  held  entitled  to  take  defence  as 
to  the  consideration  of  the  mortgage, 
and  to  show  that  it  was,  on  the 
ground  of  partial  failure  of  consid- 
eration, unlawful  and  fraudulent  to 
the  amount  of  the  premiums  (the 
society  being  unincorporated),  and 
to  that  extent  not  a  valid  charge 
against  the  land. 

As  illustrating  the  doctrine  where 
the  defence  of  usury  is  a  personal 


one,  and  cannot  be  set  up  by  any 
but  original  parties,  see  The  Peo- 
le's  Savings  Bank  and  Building 
Ass'n  v.  Collins,  27  Conn.  145; 
Stein  and  wife  v.  The  Indianapolis 
Building  Loan  Fund  and  Savings 
Ass'n,  18Ind.  237;  Loomis  v.  Eaton, 
32  Conn.  550;  Green  v.  Kemp,  18 
Mass.  515;  Reading  v.  Weston,  7 
Conn.  409;  Shufelt  ».  Shufelt,  9 
Paige  (N.  Y.),  137;  Dix  v.  Van 
Wyck,  2  Hill  (N.  Y.),  524;  Scher- 
merhorn  v.  American  Ins.  and  Trust 
Oo.,  14  Barb.  (N.  Y.)  131  (167); 
Sands  «.  Church,  6  N.  Y.  347;  Mor- 
ris v.  Floyd,  5  Barb.  (N.  Y.)  137; 
Flanders  v.  Joue?,  10  N.  H.  160; 
Lamoille  County  National  Bank 
v.  Bingham,  50  Vt.  105;  Stevens  t>. 
Muir,  8  Ind  352;  Campbell  P.  John- 
son, 4  Dana  (Ind.),  179;  Conwell  v. 
Pumphrey,  9  Ind.  135. 

*  See  Fisher  v.  Kahlnan,  3  Phila. 
(Pa.)  213;  Brooks  v.  Dorsey.  4 
Comst.  (N.  Y.)225;  Sands  r.  Church, 
6  N.  Y.  347.  It  K  indeed,  a  gen- 
eral doctrine  that  the  purchaser  is 
governed  by  the  face  of  the  mort- 
gage subject  to  which  he  buys, 
whether  it  be  to  his  advantage  or 
disadvantage.  So,  where  the  mort- 
gage called  for  payment  in  "law- 
ful money,"  whilst  the  bond  stipu- 
lated for  "lawful  silver  money"  of 
the  United  States,  the  purchaser 


360  THE   LAW   OF  BUILDING    ASSOCIATIONS.      [CH.  XIII. 

sheriff,  selling  land  on  foreclosure  of  the  second  mortgage, 
does  not,  by  conveying,  subject  to  the  first  mortgage,  deprive 
the  purchaser  of  the  right  to  set  up  the  same  defence  as 
the  law  would  otherwise  afford  him.  The  sheriff  has  no  power 
to  waive  usury.1  And,  from  a  recent  case  in  Pennsylvania 
(where,  under  the  Act  of  28  May,  1858,  the  defence  of  usury 
is  a  personal  one3),  it  would  seem  that  the  purchase  must  be 
distinctly  subject  to  the  figure  contained  in  the  mortgage,  in 
order  to  debar  the  purchaser  from  disputing  its  accura<-\  <>u 
the  ground  of  a  failure  of  consideration  to  the  extent  of  the 
excess  usuriously  taken.  Mortgages  had  been  given  to  a 
building  association  which  was  unincorporated,  and  conse- 
quently incapable  of  lawfully  stipulating  for  premiums  to 
be  paid  upon  its  loans.  The  premiums  reserved  were  in- 
cluded on  the  face  of  the  mortgages.  A  sale  of  the  mort- 
gaged premises,  subject  to  the  mortgages,  was  subsequently 
had  upon  a  junior  judgment.  Suit  was  brought  upon  the 
mortgages,  and  the  purchaser,  L.,  was  allowed  to  defend  as 
terre-tenant.  Allison,  P.  J.  (C.  P.  No.  1,  Philadelphia 
County),  whose  opinion,  before  the  Supreme  Court  upon  a 
writ  of  error,  was  affirmed  per  curiam,  says :  "  The  terre- 
tenant,  ...  is  entitled  to  take  defence  as  to  the  considera- 
tion of  the  mortgages,  notwithstanding  the  fact  found  by  the 
special  verdict,  that  at  the  '  sale  notice  was  given  of  the  mort- 
gages sued  on  in  this  case.'  The  defence  to  the  mortgages  is 
that  as  to  the  excess  [above  what  was]  actually  advanced  as  a 
loan,  they  are  without  consideration.  That  if  such  excess  or 
premium  could  not  be  recovered  against  the  land  in  the 
hands  of  the  mortgagors,  why  against  the  land  in  the  posses- 
sion of  a  terre-tenant  ?  When  one  purchases  under  and  sub- 
subject  to  the  mortgage  was  held  perhaps  in  remote  parts,  unless  the 
entitled  to  pay  in  lawful  money  of  recital  itself  leads  to  something  that 
the  United  States  of  any  descrip-  is  wanting  in  it  (e.g.,  if  it  be  given 
tion.  For  whilst  the  bond  is  the  for  future  advances).  Eagle  Bene- 
principal  debt  in  law,  and  governs  flcial  Society's  App.,  75  Pa.  St. 
the  rights  of  the  parties  to  it  between  226. 

themselves;  the  purpose  of  the  re-  '  Pinnell  ».  Boyd,  6  Stew.  (N.  Y.) 
cital  in  the  mortgage  is  merely  to  190;  S.  C.,  on  appeal,  Ib.  600. 
give  notice  of  the  substantial  char-  *  Miners'  Trust  Co.  Bank  v.  Rose- 
acter  of  the  debt  to  be  secured,  and  berry,  81  Pa.  St.  309;  Appeal  of 
not  to  send  subsequent  purchasers  Second  National  Bank  of  Titusville, 
and  mortgagees  to  seek  the  bond,  85  Id.  528. 


§  366.]        INCIDENTS   TO   LOANS   OB  ADVANCEMENTS.  361 

ject  to  a  mortgage  debt,  it  is  the  debt  which  at  the  time  is  due. 
He  ought  to  be  allowed  to  show  payments  made  upon  the  mort- 
gage by  the  mortgagor,  by  which  the  mortgage  is  to  that 
extent  extinguished,  or  to  show  payment  in  full,  or  that 
the  mortgage  debt  never  existed,  and  that  there  is  therefore 
no  such  lien  to  be  enforced  as  against  the  land.  For  the 
like  reason  he  ought  to  be  allowed  to  show  that  the  mort- 
gage is  in  part  or  in  whole  fraudulent.  The  mortgages  in 
these  cases  were  unlawful  to  the  amount  of  the  premiums, 
and  to  that  extent  never  were  a  valid  charge  against  the 
land,  having  been  given  for  a  larger  sum  than  the  actual 
loan.  "When  the  purchase  is  under  and  subject  to  a  lona  Jide 
debt  secured  by  mortgage,  the  purchaser  buys  for  a  consid- 
eration of  which  the  mortgage  debt  forms  a  part ;  but  where 
the  debt  is  not  bona  fide,  or  where  it  does  not  exist  at  all,  he 
ought  to  be  entitled  to  take  defence  to  the  claim. 

"  Where  .land  is  sold  subject  to  a  mortgage,  it  becomes 
the  primary  fund  to  pay  the  mortgage  debt,  but  it  is  the  debt 
of  so  much  of  it  as  is  actually  due.  Ilansell  v.  Lutz,  8  Har- 
ris, 284,  decides  no  more  than  this,  where  it  says  that  the 
purchaser  shall  discharge  the  mortgage.  Nor  is  Good  v. 
Grant,  26  P.  F.  Smith,  52,  an  authority  against  the  conclu- 
sion reached  on  this  point.  The  effort  of  the  terre-tenant  is 
not  to  recover  back  usury  paid  by  the  mortgagors.  His  de- 
fence rests  upon  a  partial  failure  of  consideration,  and  to 
be  allowed  credit  for  the  interest  as  on  the  real  instead  of 
the  nominal  debt.  Coolers  Ajypeal,  1  Grant,  401,  does  no 
more  than  affirm  the  general  principle  of  the  liability  of  a 
purchaser  at  sheriff's  sale  of  an  estate  encumbered  by  a  prior 
mortgage  to  pay  it  off.  That  is,  the  mortgage,  or  so  much 
as  is  actually  due  upon  it."  ' 

Usury  Merged  in  Judgment  Cannot  be  Recovered. 

§  366.  If  the  person  entitled  to  set  up  the  defence  of 
usury  allows  the  usurious  claim  to  become  merged  in  a  judir- 
ment,  it  is  then  too  late  to  set  it  up.  Thus,  where  the  purchaser 
of  mortgaged  premises"  had,  as  terre-tenant,  an  opportunity 

'Link  v.  Germantown  Buildiug  Ch.  (N.  Y.)  395;  Berry  v.  Thompson, 

Association,  89  Pa.  St.  15.  17  Id.   436.     See  also,  Lansing  c. 

1  Thatcher  v.  Gammon,  12  Mass.  Eduy,  1  Id.  49. 
268;  Thompson  v.  Berry,  3  Johns. 


THE   LAW   OF   BUILDING   ASSOCIATIONS.     [CH.  XIII. 

to  defend  in  an  action  upon  the  mortgage,  he  was  not  per- 
mitted, after  verdict  and  judgment,  to  deny  that  the  amount 
thereby  ascertained,  although  far  in  excess  of  the  legal  rate  of 
interest,  was  due  upon  it ;  nor  could  his  mortgagees  do  so, 
after  verdict,  and  before  final  judgment,  on  the  first  (the 
building  association's  usurious)  mortgage.1 

Plea  of  Usury  must  Conform  to  Statute. 

§  367.  The  plea  of  usury  (apart  from  fraud)  must  con- 
form to  the  statute,  where,  as  a  defence,  it  has  been  made 
the  subject  of  special  legislation.2  But  where  property  is  sold 
on  an  usurious  mortgage,  and  the  proceeds  are  in  court  for 
distribution,  the  defence  of  usury  need  not  be  raised  by  spe- 
cial plea.3  In  Maryland,  indeed,  it  is  said  that  the  question 
of  usury  in  the  terms  of  a  mortgage  arises  upon  the  statement 
of  the  final  account  by  the  auditor.4  It  cannot,  therefore,  be 
urged  as  an  objection  to  the  sale  of  the  property ;  and  if  the 
sworn  statement  of  the  mortgage  claim,  required  by  law,6  is 
erroneous  in  not  showing  the  true  balance  due  upon  the  mort- 
gage, it  is  open  to  correction  when  the  account  may  be  stated 
by  the  auditor ;  but  such  error  constitutes  no  reason  for  set- 
ting aside  the  sale.' 

Charges  Incidental  to  Negotiation  of  Loan  when  not  Usurious. 

§  368.  An  agreement  on  the  part  of  the  borrower  to  bear 
the  expenses  of  searching  the  records  and  preparing  (and  re- 
cording) the  papers,  is  no  part  of  the  loan  proper.  Hence, 
the  deduction,  according  to  custom,  of  a  reasonable  sum,  from 
the  amount  coming  to  the  borrower,  to  cover  such  expenses, 
infuses  no  element  of  usury  into  the  transaction.7  But  where 

1  Schnepfs  App.,  48  Pa.  St.  37.  Public  Laws,   and  Act  1864,   Ch. 

9  Pattison  «.    The  Albany  Build-  124. 

ing  and  Loan  Association,   63  Ga.         •  The  Maryland  Permanent  Land 

873.  and  Building  Society  of  Baltimore 

8  The  Citizens'  Security  and  Land  v.  Smith  et  al.,  tibi  supra. 
Co.  of  Baltimore  City  v.  Uhler,  48        7  Hoboken  Building  Association 

Md.  455.  v.  Martin,  2  Beas.  (N.  J.)  428.     See 

4  The  Maryland  Permanent  Land  also  Ex'rs  of  Howell  v.  Auten,  1  Gr., 

and  Building  Society  of  Baltimore  Ch.  R.  (N.  J.)  45;    Hopkins  r.  Ba- 

v.  Smith  et  al.,  41  Md.  516.  ker's  Adm'r  et  al.,  2 P.  and  H.  (Va.) 

4  Art.  4,  §  783,  of  the  Code  of  110;  Smith  v.  Wolf,  55  Iowa,  555. 


§  369.]       INCIDENTS  TO   LOANS   OR   ADVANCEMENTS.  363 

the  lender  is  a  corporation,  and  its  agent  in  making  the  loan 
is  its  officer,  and  it  is  shown  that  a  bonus  was  paid  to  the  lat- 
ter for  the  loan,  in  pursuance  of  a  contract  made  by  him  with 
the  borrower,  in  the  name  of,  and  for  the  corporation  ;  it  must 
be  assumed,  in  the  absence  of  proof  to  the  contrary,  that  the 
bonus  was  paid  to  and  received  by  the  corporation,  in  conse- 
quence of  which  the  loan  is  rendered  usurious.1  Where,  how- 
ever, the  corporation  is  shown  to  have  known  nothing  about 
it,  no  such  result  follows.* 

Lawful  Incidents  to  Building  Association  Mortgage. 

§  369.  Such  being  the  principles  governing  in  all  cases  of 
usury  which  may  arise,  it  remains  to  be  seen  how  far  the 
loans  or  advancements  of  building  associations  to  their  mem- 
bers, under  the  peculiar  powers  and  immunities  conferred 
upon  these  institutions,  are  exempt  from  the  operation  and 
interference  of  the  usury  laws.  In  view  of  what  has  been 
said,  in  the  preceding  chapter,  concerning  the  essential  nature 
and  ingredients  of  these  contracts,  it  is  unnecessary,  for  the 
purposes  of  the  present  examination,  to  take  any  further  no- 
tice of  the  conflicting  theories  regarding  the  same.  Bearing 
in  mind  (1),  that  the  contract  entered  into  by  the  borrowing 
member  embraces  all  the  undertakings  and  stipulations, 
which  are  part  and  parcel  of  the  entire  transaction,  whether 
they  be  embodied  in  the  written  evidence  of  his  obligation, 
or  depend  in  parts  upon  agreements  resulting  from  the  rela- 
tions of  membership,  or  again  be  made  up  in  part  by  per- 
formances ancillary  and  prerequisite  to  the  completion  and 
fruition  of  his  bargain,  under  the  terms  of  the  same,  and  the 
rules  of  the  society;  and  (2),  that  this  contract  is  legitimate 
and  absolutely  binding  just  so  far  as  it  responds,  in  form  and 
substance,  to  the  declared  intention  of  the  Legislature,  and  is 
upheld  by  statute,  according  to  the  construction  put  upon  the 
same  by  the  courts  of  the  State :  it  is  manifest,  that  what  may 
be  lawful  in  one  State,  under  its  statutes,  may  be  improper 
in  another,  under  different  statutes ;  that,  indeed,  enactments 
most  similar  in  their  terms,  may  yet,  under  the  interpretation 
authoritatively  put  upon  the  one  or  the  other,  confer  differ- 

1   Dime    Savings    Institution    «.         *  Muir  r.   The  Newark  Savings 
Mulford,  4  Stew.  (N.  J.)  99.  Institution,  1  C.  E.  Gr.  (N.  J.)  587. 


364  THE  LAW   OF   BUILDING   ASSOCIATIONS.       [CH.   XIII. 

ent  powers,  and  impose  widely  divergent  limitations.  For 
the  details  of  this  branch  of  the  law  of  building  associations, 
as  for  those  of  every  other,  therefore,  as  adapted  to  special 
localities,  it  is  necessary  to  refer  to  the  particular  provisions 
of  the  statutes  of  the  several  States.  Yet  there  are  certain 
established  rules  governing  their  construction;  certain  prin- 
ciples founded  in  the  very  nature  and  purpose  of  these  institu- 
tions, generally  applicable  to  the  matter  at  hand,  which  not 
only  admit  of  being  digested  and  systematized,  but  are,  in 
truth,  indispensably  necessary  in  order  to  an  adequate  and 
ready  comprehension  of  the  force  and  bearing  of  any  given 
statutory  provision  upon  the  subject. 

§  370.  The  ordinary  formal  incidents  to  a  building  asso- 
ciation loan  are,  (1)  stock-payments  or  dues,  (2)  interest,  (3) 
premium,  (4)  fines — these  constituting,  as  a  general  thing,  the 
whole  debt  of  the  advanced  member,  for  the  discharge  of 
which  he  gives  the  society  (5)  mortgages  or  other  security. 
The  privilege  of  redeeming  his  obligation  before  the  expira- 
tion of  the  society,  is  one  which  is  incident  to  his  rights  as  a 
member  in  it,  and  has  been  already  sufficiently  considered.1 

Significance  of  Stipulation  for  Stock-Payments  or  Dues. 

§  371.  Stock-payments,  or  dues,  are  the  fixed  periodical 
contributions  upon  each  share  of  stock  held,  which,  by  virtue 
of  his  original  undertaking  of  membership  in  the  society,  the 
holder  thereof  is  liable  to  pay,  whether  he  remain  an  in- 
vestor or  become  a  borrower.  Having  been  subject  to  this 
liability  in  the  former  capacity,  he  is  not  relieved  from  it  by 
the  fact  of  having  incurred  the  additional  obligations  of  the 
latter  relation."  On  the  contrary,  remembering  that  build- 
ing association  loans,  in  the  proper  sense,  are  never  designed 
to  be  collected  before  the  expiration  of  the  society  or  series, 
and  cannot,  legitimately,  be  so  intended,  the  agreement  faith- 
fully to  continue  the  payment  of  dues  becomes  the  all-im- 
portant consideration  in  the  transaction.  For,  under  the 
same  cloak  with  it  there  is  conveyed  the  substance  of  an  im- 
plied undertaking  to  allow  the  society  to  make  itself  whole 
out  of  the  accumulation  of  these  stock-payments,  together 

1  See  ante,  §§  153-174. 

*  Delano  «.  Wild,  6  Allen  (Mass.).  1. 


§  371.]       INCIDENTS  TO   LOANS  OB  ADVANCEMENTS.  365 

with  the  proportionate  share  of  the  common  profits  to  be 
added  thereto.  If,  upon  allowing  a  member  an  advancement 
of  the  prospective  value  of  his  shares,  the  society,  in  return, 
require  nothing  more  of  him  than  an  assurance,  backed  by  a 
mortgage  upon  his  property,  that  he  will  continue  to  make 
the  payments  his  membership  requires  of  him,  and  interest 
upon  the  loan  he  has  received,  such  a  consideration  will  be  of 
slight  benefit  to  the  society,  unless  it  shall  also  have  the  right 
of  appropriating  the  results  of  his  regular  payments  in  the 
accumulated  par  value  of  his  shares,  and  the  borrower,  there- 
fore, in  fact,  renounces  his  claim  to  receive  such  dividend 
becoming  payable  upon  his  share  at  the  winding  up  of  the 
scheme  :  he  has  anticipated  it  by  way  of  advancement  at  the 
hands  of  the  association,  and  cannot,  in  equity,  claim  it  a 
second  time.  For  the  purposes  of  the  final  distribution,  the 
advanced  shares  may,  to  their  par  value,  be  regarded  as  sunk, 
merged  in  the  capital  stock.  This  principle  is  often  formu- 
lated in  the  proposition  that  a  member,  becoming  a  borrower, 
loses  his  interest  in  the  final  distribution  ;  can  no  longer  par- 
ticipate in  the  profits  of  the  society's  business ;  and  similar 
inaccurate  and  misleading  statements.1  By  virtue  of  his 
continued  membership,  he  is  entitled  to  share  in  the  distribu- 
tion ;  *  but  he  has  given  the  society  a  lien  upon  the  dividend 
accruing  to  his  advanced  shares,  to  the  amount  of  their  par 
value.  The  equivalent  of  that  par  value  he  has,  in  the  trans- 
action of  loan,  anticipated,  by  receiving  the  whole  of  it  re- 
duced by  the  amount  which  he  has  agreed  to  pay  for  his  own 
accommodation,  and  for  the  risk  run  by  the  society  in  making 
the  advancement,  as  well  as  for  the  purpose  of  compensating 
his  fellow-members  for  the  advantage  accorded  to  him  by  his 
preference  over  them.  If  there  be  any  surplus  of  assets,  it 
is  said,  the  borrowing  member  is  entitled  to  come  in  for  his 
share  of  it  on  distribution.1  Again,  as  it  is  within  the  power 
of  the  association  to  compromise  with  its  borrowers,4  he  may 
settle  with  it  for  all  his  liabilities,  and  regain  full  control  over 

1   See  White  v.  The  Mechanics'  Building  and  Savings  Association, 

Building  Association,  22  Grat.  (Va.)  25  Ohio  St.  186. 

233.  4  State  *.    The  Oberlin  Building 

*  See  ante,  §§  146-148.  and  Loan  Association,  35  Ohio  St. 

8  Hagerman  et  al..  v.   The    Ohio  250.     Sec  ante,  §  323. 


366  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [CH.  XIII. 

his  stock,  and  participate  in  the  distribution,  equally  as  any 
other  member  not  indebted  to  it.  One  method  of  doin<^  this 
is  by  inducing  the  association  to  assign,  for  such  a  considera- 
tion as  it  consents  to  accept  in  discharge  of  the  debt,  his 
mortgage  to  some  other  person,  who  will  then  hold  it  as  a 
subsisting  security  for  the  amount  of  the  money  covered  by 
it,  whilst  the  mortgagor  will  draw  his  stock-dividend  from  the 
society.1 

§  372.  Such  is,  in  reality,  the  purpose  of  binding  the  bor- 
rower in  his  security  to  the  association,  to  the  payment  of 
stock  contributions, — the  certainty  of  creating  a  fund  stand- 
ing to  the  credit  of  the  borrower,  in  the  hands  of  the  society, 
wherefrom  the  latter  may  reimburse  itself  for  the  advance- 
ment made.  This  design  undoubtedly  appears  with  more 
distinctness,  where  the  return  of  a  specific  sum,  in  final 
liquidation  of  the  debt,  is  stipulated ;  for,  in  such  case,  the 
fact  of  the  payment  of  dues,  being  required  by  the  terms  of 
the  obligation  itself,  or  by  an  agreement  concurrent  with  and 
supplementary  to  the  same,  both  indicates  the  contemplated 
method  of  payment  of  that  sum,  and  is,  by  its  apparent  rela- 
tion to  the  discharge  of  the  principal,  assigned,  upon  the  face 
of  the  transaction,  its  proper  place  and  function  in  the  same. 

The  covenant,  however,  answers  the  further  purpose  of 
assuring  the  society  of  the  borrower's  performance  of  that 
duty  incident  to  membership,  which  consists  in  contributing 
to  the  common  losses  and  expenses.  These,  of  course,  must 
be  defrayed  out  of  the  payments  made  by  members  before 
any  portion  of  them  can  become  the  source  of  profit  to  the 
society.  If  they  be  great,  the  period  over  which  stock-pay- 
ments are  extended  will  be  prolonged ;  because  a  greater 
share  of  them  will  be  required  to  cover  these  outlays,  and  a 
proportionably  lesser  one  can  be  devoted  to  investment  and 
gain.  By  giving  security,  then,  for  the  continuance  of  these 
payments  to  the  end  of  the  society's  running,  i.e.,  to  the 
period  when,  after  allowing  for  all  deductions  by  reason  of 
losses,  etc.,  the  shares  shall  have  reached  their  ultimate  value, 
the  borrower  effectually  undertakes  to  bear  his  whole  share 
of  them.  Now,  whilst  one  palpable  purpose  of  requiring  and 
giving  the  assurance  of  continued  stock -payments  is  the  rais- 

1  Such  arrangements  are  of  frequent  occurrence  in  Pennsylvania. 


§  373.]       INCIDENTS  TO   LOANS   Oil   ADVANCEMENTS.  367 

ing  of  a  credit  standing  in  favor  of  the  borrower,  in  the 
hands  of  the  society,  with  the  ulterior  view  of  then  making 
that  credit  the  source  of  the  society's  reimbursement ;  the 
undertaking  is,  nevertheless,  one  which  is  independent  and 
distinct  from  that  of  actually  permitting  the  society  to  recoup 
itself  out  of  this  fund.  It  is  simply  the  re-assertion  of  a  pre- 
existing duty  ;  and  the  securing  it  by  mortgage,  a  condition 
of  the  loan,  as  upon  the  fulfilment  of  that  duty  depends  the 
possibility,  or  at  least  the  certainty,  of  the  society's  being  ulti- 
mately made  whole.  Hence,  neither  the  obligation  of  that 
duty,  nor  the  availability  of  a  security  given  for  its  perform- 
ance, is  interrupted  by  the  premature  repayment  of  the  loan ; 
but  the  security  given,  even  after  repayment,  remains  such 
for  the  purpose  for  which  it  was  manifestly  intended,  viz. ; 
the  performance  of  membership  duties  regarding  the  pay- 
ment of  dues, l  and  may  be  used  by  the  society  to  enforce  the 
same.2 

"  Dues"  Practically  Including  Interest  or  Redemption-Money. 

§  373.  In  the  nomenclature  adopted  by  some  statutes  and 
building  associations  there  is  included,  under  the  term 
"dues,"  what  would  be  more  properly  called  redemption- 
money,  or  simply  interest.  The  dues,  per  share,  of  the 
investing  member  being  a  certain  fixed  amount  per  week  or 
month,  these  dues  (it  is  said)  become  increased  by  another 
fixed  amount  per  week  or  month,  after  he  has  received  his 
advancement,  and,  usually,  this  additional  payment  is  the 
amount,  for  a  week  or  month,  of  the  interest,  at  the  legal 
rate,  either  upon  the  nominal  par  value  of  the  share  ad- 
vanced, or  upon  the  amount  actually  received  by  the  bor- 
rower. The  two  amounts,  however,  make  a  single  payment, 
and  in  England  have  been  treated  strictly  as  such ;  so  that, 
in  ascertaining  the  present  value  of  a  mortgage  given  to  a 
building  association  for  the  securing  to  it  of  dues,  etc.,  during 
its  running,  by  finding  the  probable  period  of  the  same,  and 
computing  the  aggregate  of  the  "dues"  likely  to  become 

1  And  the  payment  of  fines  seems  mortgage.      See   Clarkville  Build- 
to  belong  to  these  duties,  even  where  ing  and  Loan  Association  v.   Ste- 
thcrc  is  no  express  stipulation  or  phens,  11  C.  E.  Or.  (N.  J.)  851. 
mention  of  them  in  the  bond  and  *  See  ante,  §§  88-90,  106-107. 


TIM;  LAW  OF  BUILDING  ASSOCIATIONS.     [< :jj.  \jn. 

payable  therein,  the  increased  dues  stipulated  for  in  the 
mortem*-,  without  rebate,  have  been  taken  as  the  basis  of  the 
computation.1  On  the  other  hand,  a  subdivision  of  such 
"  dues"  (made  a  unity  by  the  by-laws),  for  the  purpose  of 
impoMng  distinct  fines  for  the  nonpayment  of  each,  has  been 
condemned  as  improper.2  This  arrangement,  however,  is  >.  > 
transparent,  that,  where  any  injustice  was  likely  to  result 
from  it,  the  courts  in  this  country,  and  the  British  Court  of 
Chancery,  in  a  recent  case,  have  not  hesitated  to  analyze  it 
according  to  the  elements  it  actually  contains.8  It  is  clear 
that  where  the  word  "  dues"  is  used  in  that  sense,  a  mortiraire 
given  to  secure  the  payment  of  "  dues,"  etc.,  can,  after  dis- 
charge of  the  money-debt  owing  to  the  society,  be  used  for 
the  enforcement  of  such  "  dues "  only  as  are  incident  to 
membership  proper,  without  reference  to  the  additional  obli- 
gations resulting  from  an  advancement.  These  belong  more 
properly  to  the  subject  of  interest,  and  dues  representing 
interest  cease  with  the  debt.4 

Right  and  Extent  of  Interest  Reservation. 

§  374.  The  taking  of  interest  is  so  much  the  ordinary 
incident  to  a  loan,  that  the  authority  to  loan  implies  it.  It  is 
not,  therefore,  uii/rcb  vires  of  the  building  association  to  make 
a  loan  upon  interest.6  This  must  be  at  the  legal  rate,  and 
will  not,  without  valid  statutory  authority,  be  permitted  to  be 
charged  upon  more  than  the  amount  actually  advanced  to 
the  borrower.*  It  follows  from  the  doctrine  that  payments 
upon  stock  are  not  payments  upon  the  loan ;  that  is,  that  the 

1  See  ante,  §§  158-164.    But  that  society);  and  see  Clarkville  Build- 

the  same  rule  is  not  followed  in  this  ing  and  Loan  Association  r.    Ste- 

country,  see  post,  §  375.  phens,  11  C.  E.  Gr.  (N.  J.)  301 ;  De- 

8  Shannon  v.  The  Howard  Mu-  lano  v.  Wild.  6  Allen  (Mass.),  1. 

tual  Building  Association  of  Balti-  And  see  post,  §  376. 

more,  36  Md.  383.  4  See  post,  §  375.    The  obligation 

3  See  Mills  et  al.   v.   The  Salis-  to  pay  dues  and  interest  is  not  sus- 

bury  Building  and  Loan  Associa-  pended  hy  the  bringing  of  suit  upon 

tion,  75  N.  C.  292;  Hauner  et  al.  v.  the  mortgage.     See  post,  §  377,  and 

The  Greensboro  Building  and  Loan  cases  there  cited. 

Association,  78  N.  C.  188;  Ex  parte  6  City  Building  and  Loan  Co.  «. 

Osborue,   In    re    Goldsmith,    Law  Fatty,  1  Abb.  App.  Dec.  (N.  Y.) 

Rep.,   10  Ch.   App.  41  (this  was,  347. 

however,  the  case  of  a  permanent  6  See  post,  §§  383,  398. 


§  375.]       INCIDENTS  TO   LOANS   OK   ADVANCEMENTS.  369 

payments  of  dues  are  not  intended  to  be  applied,  at  once  they 
are  made,  as  partial  payments,  to  the  pro  tanto  extinguish- 
ment of  the  debt,  but  are  paid  as  the  capital  of  the  com- 
pany, and  paid  alike  by  those  who  do,  and  those  who  do  not 
take  loans ; '  that  the  figure  upon  which  the  interest  is  to  be 
paid,  and  hence  the  amount  of  the  interest  itself,  do  not 
vary,  from  the  time  the  loan  is  taken  to  the  time  when  it  is. 
finally  discharged ;  and  that,  consequently,  the  reservation  of 
an  unvarying  amount  of  interest  for  the  whole  period  of  the 
loan,  whilst,  at  the  same  time,  the  borrower's  stock-payments 
are  going  on,  is  not  usurious."  And  these  payments  on  ac- 
count of  interest  may  ordinarily  be  stipulated  to  be  made 
monthly  and  even  weekly,  under  the  rules  of  the  society,  and 
the  statutes  governing  them.8  The  substantial  identity  of 
interest  reserved  as  such,  and  when  called  redemption-money 
or  dues,  has  already  been  pointed  out.4 

Interest,  in  Any  Form,  Ceases  upon  Reimbursement  of  Society. 

§  375.  The  interest  reserved  by  a  building  association 
upon  an  advance  to  its  members  ceases  when  it  is  reimbursed 
for  that  advance.  It  has  been  seen  that  the  repayment  of  a 
loan  is  one  of  the  rights  belonging  to  membership  in  these 
societies,5  and  that  the  early  English  decisions,  in  ascertain- 
ing the  amount,  upon  the  payment  of  which,  presently,  the 
borrower  will  be  discharged  of  his  future  liabilities  arising  from 
the  advancement  made  to  him,  adopted  the  rule  of  calculat- 
ing the  probable  (or  possible)  duration  of  the  society's  exist- 
ence, and  treating  all  the  payments  likely  to  become  due  during 
the  period  thus  fixed,  as  immediately  payable ; "  and  that  the 
rule  has  been,  in  a  measure,  followed  in  the  United  States.7 
Remembering  that,  in  the  cases  decided  in  England,  there 
was  no  interest  reserved  as  such,  but,  in  lieu  thereof,  a 
certain  monthly  payment,  termed  "redemption-money",  and 

1  See  post,  g§  455-457.  8  See    Red    Bank  Association  t\ 

8  Citizens' Mutual  Loan  and  Ac-  Patterson,  ubisn/»;i. 

cumulating    Fund    Association    v.  *  See  ante,  §§  333,  373. 

Webster  ct  al.,  25  Barb.  (N.  Y.)  263;  *  See  ante,  §§  152-153. 

City  Building  and  Loan  Co.  «.  Fat-  •  See  ante,  §§  154-164. 

ty.  1  Abb.  App.  Dec    (N.  Y.)  347;  '  See  ante,  §§  154-157,  165-166, 

Ked  Bunk  Association  v.  Patterson, 

12  C.  E.  Gr.  (N.  J.)  223. 


370  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XIII. 

that  this  redemption-money,  in  accordance  with  the  doctrine, 
that  the  advancement  was  in  no  sense  of  the  word  a  loan, 
was  not  regarded  as  interest  for  the  forbearance  of  money,1 
— those  cases  allowed  no  rebate,  except  by  way  of  bonus 
under  the  rules  of  the  society,"  for  the  premature  redemp- 
tion of  the  debt.  In  other  words,  although  the  stipulated 
payments,  by  way  of  monthly  dues,  included  both  stock-pay- 
ments and  redemption-money  exactly  equivalent  to  interest 
upon  the  nominal  value  of  the  shares  advanced,  the  logic  of 
the  theory  applied  to  these  transactions  required  the  courts 
to  overlook  that  fact,  and  compel  the  debtor  to  pay,  in  re- 
demption of  his  mortgage  before  the  expiration  of  the  soci- 
ety, the  full  amount  of  all  the  dues  he  had  contracted  to 
pay  during  its  entire  existence.  An  exaction  so  harsh  and 
oppressive 8  has  not  been  adopted  by  American  courts,  even 
where  they  assumed  to  be  guided  by  the  English  decisions  in 
regarding  the  nature  of  the  transaction  as  wholly  foreign  to 
that  of  a  loan  of  money.*  Hence,  in  Maryland,  the  rale  is 
stated  thus :  Ascertain  by  proof  the  probable  duration  of  the 
society,  then  estimate  the  aggregate  amount  of  the  weekly 
and  monthly  instalments  payable  during  that  time,  from  tJwt 
sum  rebate  a  just  amount  of  interest,  and  add  thereto  the 
arrearages  due,  after  allowing  for  payments  made  to  the 
society,  and  the  sum  thus  ascertained  is  the  amount  which 
the  mortgagee  is  entitled  to  receive  inpresenti  in  satisfaction 
of  the  mortgage.6  The  same  principal  seems  to  be  expressed 

1  See  Seagrave  v.  Pope,  ante,  §  160.  4  The     case    of    the    Somerset 

3  See  Fleming  v.  Self,  3  De  G.,  County  Building,  Loan  and  Savings 

Mac.  and  G.  997;  3  Eq.  R.  14;  1  Association  v.  Canman  and  Vnnder- 

Jur.,  N.  S.  25;  24  L.  J.,  Ch.  29;  vere,    3  Stock.    (N.    J.)    282,   can 

ante,  §§  161,  338.  scarcely  be  cited  as  an  exception. 

3  Yet  it  is  strictly  consequential  The  transaction-  there  is  said  by  the 

upon  the  assumption  that  the  trans-  court  itself  to  have  been  sui  generis, 

action  between  the  society  and  the  and  the  decree  of  the  court,  assum- 

borrower  has  nothing  in  it  of  the  ing  the  principal  debt  to  have  been 

nature  of  a  loan;  and  the  fact  that  $600,  payable  without  interest,  by 

American  courts  of  unquestioned  monthly  instalments  of  $3,  cannot, 

authority  have  been  obliged  to  re-  without  straining  points  on  all  sides, 

pudiate  this  logical  result  of  a  doc-  be  brought  under  any  recognized 

trine  they  endeavor.in  other  matters,  principle. 

to  adopt,  shows  how  impracticable  B  Robertson    v.    The    American 

and  one-sided  the  theory  itself  is.  Homestead  Association,  10  Md.  397. 


§376.]        INCIDENTS  TO   LOANS   OR   ADVANCEMENTS.  371 

in  Ohio,  in  the  rule  thus  laid  down  :  Ascertain  by  proof  the 
probable  duration  of  the  corporation,  and  calculate  the  dues 
and  interest  yet  to  come ;  then  find  the  principal,  which,  with 
interest  for  the  supposed  time,  will  amount  to  the  dues  and 
interest  already  calculated ;  this  will  be  the  present  value  of 
the  anticipated  payments ;  to  this  principal  add  the  arrear- 
ages due,  and  the  fines  for  the  time  between  the  date  of 
default  and  the  entry  of  the  decree  of  sale,  and  the  sum  will 
be  the  present  value  of  the  mortgage.1 

§  376.  In  England,  indeed,  in  a  recent  case,"  the  same  rule 
has  been  applied,  although  under  distinction  drawn  as  to  pre- 
vious cases.  The  rules  of  a  permanent  building  society 
provided  that  "  any  member  receiving  an  advance  shall  repay 
the  same  with  interest  at  the  rate  which  shall  be  determined 
by  the  board,  by  monthly  or  other  instalments."  Goldsmith, 
being  a  member,  obtained  an  advance  of  £600,  his  whole 
monthly  payment,  or  installment,  being  £9  13s.,  calculated  to 
discharge  the  debt  in  seven  years.  He  paid  only  two  install- 
ments, and  defaulting  thereafter,  his  property  was  sold.  Out 
of  the  proceeds  of  the  sale,  the  society  claimed  to  retain,  upon 
the  principle  of  previous  cases,  the  whole  amount  of  the 
monthly  installments  to  the  end  of  the  seven  years,  together 
with  the  fines  due  for  payments  in  arrear  down  to  the  time 
of  sale.  Cairns,  L.  C.,  in  passing  upon  this  claim,  says  :  "  The 
manner  in  which  the  mortgage  deed  is  expressed  and  in 
which  the  rules  are  worded,  creates  an  unnecessary  amount  of 
obscurity ;  but,  after  careful  attention  to  the  language  of 
these  documents,  I  have  no  doubt  as  to  the  real  nature  of  the 
transaction.  Denuded  of  technicalities,  it  is  an  advance  in 
respect  of  the  shares  to  which  Goldsmith  was  entitled ;  and, 
.  .  .  [he]  was  treated  as  if  he  had  received  an  advance  of 
£600  at  £5  per  cent.;  but  the  way  in  which  this  was  done 
was,  that  it  was  agreed  that  the  repayment  should  be  spread 
over  seven  years,  by  monthly  instalments,  each  instalment  to 
be  made  up  by  a  portion  of  interest  and  a  portion  of  princi- 

1  Cincinnati    German    Building  «.  The  Ohio  Building  and  Savings 
Association  No.  3  t>.  Flach  et  al.,  1  Association,  25  Ohio  St.  186. 
Rep.  (Cine.  Super.  Ct.)  468,  which         *  Ex  parte  Osborne,  in  re  Gold- 
seems  approved  in  Hagerman  et  al.  smith,  Law  Rep.,  10  Ch.  App.  41. 


372  THE  LAW  OF  BUILU1XU   ASSOCIATIONS.       [cU.  XIII. 

]>al.  If  that  be  so,  one  would,  in  the  absence  of  any  stipula- 
tion to  the  contrary,  suppose  that,  if  default  was  made  in 
payment  of  any  of  the  instalments,  and  the  property  were 
sold,  all  that  was  due  for  monthly  instalments  and  for  fines 
was  to  be  paid  out  of  the  proceeds  of  the  sale,  but  that  with 
regard  to  the  future,  so  much  of  the  principal  sum  as  remained 
unpaid  having  been  paid  off,  there  would  be  nothing  in  respect 
of  which  interest  could  accrue.  Interest  implies  forbearance, 
and,  therefore,  when  the  whole  is  paid  there  can  be  no  inter- 
est. That  seems  the  natural  result  of  the  transaction,  and  the 
trust  of  the  sale  moneys  in  the  mortgage  deed  is  consistent 
with  that  view.  It  is  there  provided,  that  the  trustee,  after 
payment  of  the  expenses  of  the  sale,  shall  '  retain  all  such 
subscriptions,  lines,  and  other  sums  of  money  and  payments 
which  shall  be  then  due,  or  which  would  afterwards  become 
due,  in  respect  of  the  said  shares  during  the  then  remainder 
of  the  said  period  of  seven  years,  it  being  agreed  by  the  par- 
ties hereto  that  in  case  any  such  sale  shall  take  place  all  the 
moneys  which  would  at  any  time  afterwards  become  due  from 
the  said  G.  Goldsmith,  his  executors,  administrators,  or  assigns, 
in  respect  of  the  said  shares,  according  to  the  rules  of  the  said 
association,  shall  be  considered  as  being  immediately  due  and 
payable.'  With  regard  to  the  future,  you  cannot  include 
under  '  moneys  which  would  at  any  time  afterwards  become 
due,'  any  lines  ;  no  more  can  you  include  payments  in  respect 
of  interest,  for  interest  can  only  arise  in  respect  of  a  principal 
sum  remaining  outstanding  and  forborne.  Therefore,  my 
conclusion  is,  that  everything  due,  in  respect  of  monthly  in- 
stalments and  fines,  at  the  time  of  the  sale  must  be  retained ; 
and  then  it  must  be  ascertained  how  much  of  the  monthly 
payments  represented  principal  and  how  much  interest,  and 
it  will  then  appear  how  mucli  of  the  principal  remained  un- 
paid. That  must  also  be  retained,  and  that  will  conclude  the 
transaction."  Mellish,  L.  J.,  concurring,  says,  however :  "  Ac- 
cording to  the  rules  of  this  society  this  was  not  strictly  an 
advance  in  anticipation  of  the  sum  eventually  payable  to  the 
member  in  respect  of  his  shares,  as  it  was  in  other  cases  which 
had  been  before  the  courts  ;  but  the  ninth  rule  says  that  any 
member  receiving  an  advance  shall  repay  the  same  with  in- 
terest at  the  rate  which  shall  be  determined  by  the  board,  that 


§  377.]        INCIDENTS   TO   LOANS   OR   ADVANCEMENTS.  313 

is,  at  £5  per  cent.  He  was,  therefore,  not  only  to  receive  an 
amount  equal  to  his  subscriptions,  but  he  was  to  repay  any 
amount  which  might  be  advanced,  which  might  be  more  or 
might  be  less,  than  the  amount  of  his  shares."  '  Yet  the  pay- 
ments which  a  borrowing  member  in  a  permanent  society "  *is 
bound  to  make  are  calculated  to  render  his  shares,  at  the  end 
of  a  certain  time,  just  equal  in  value  to  the  amount  of  his 
loan  with  premium  and  interest ;  the  only  difference,  in  this 
respect,  between  those  and  terminating  societies  being,  that, 
instead  of,  as  in  the  latter,  all  shares  having  to  run  a  given 
period  to  reach  maturity,  when  their  value  may  be  applied  to 
the  extinguishment  of  the  debt,  the  borrower,  in  the  former, 
is  permitted  to  elect  the  period  most  convenient  to  himself, 
whereupon  his  payments  are  so  calculated  and  adjusted,  as  to 
accomplish  the  result  he  desires  within  that  period.  There 
is,  therefore,  no  reason,  in  the  nature  of  the  case,  why  the  rule 
should  be  different  in  these  two  classes  of  associations.  Where 
the  payments  of  principal  and  interest  are  expressly  and  eo 
nomine  made  elements  in  the  transaction  and  stipulations  of 
the  loan,  there  can,  of  course,  be  no  claim,  on  the  part  of  the 
building  association,  to  recover  interest  beyond  the  time 
when  the  principal  is  returned. 

Running  of  Interest  not  Suspended  by  Bringing,  and  During  Pendency 
of,  Suit,  but  by  Tender. 

§  377.  The  running  of  interest,  and  consequently  of  the 
period  of  grace  allowed  for  the  payment  of  arrears,  is  not 
suspended  by  the  bringing,  or  during  the  pendency  of,  a  suit 
on  the  bond  and  mortgage  of  the  borrower.3  But  the  tender 
of  mortgage  money  actually  due  by  a  person  having  the  right 

1  See  also  Matterson  v.  Elderfleltl,  stead  of  at  one  time.  In  calculating 
Law  Rep.,  4  Ch.  App.  207,  where  what  is  due,  they  charge  him  in  his 
the  transaction,  also  in  a  permanent  pass-book  with  principal  and  inter- 
society,  was  somewhat  like  the  est,  and  split  the  whole  sum  so 
above,  except  that  there  was  no  charged  into  monthly  instalments, 
mention  of  "interest,"  but  merely  The  mortgagor  borrows  on  these 
dues.  This,  however,  was  held  im-  terms.  The  directors  could  not  call 
material.  "  I  think,"  says  ITather-  in  the  £1200;  they  must  wait  for  the 
ley,  L.  C.,  "the  true  explanation  of  instalments  becoming  due." 
the  transaction  is,  that  the  borrower  *  See  ante,  §  46. 
has  the  advantage  of  making  the  re-  3  The  German  Fair  Hill  Building 
payment  by  fixed  instalments,  in-  Association  v.  Metzger,  3  W.  N.  C. 


37-i  THE  LAV.'   07  BUILDING   ASSOCIATIONS.        [CH.  XIII. 

to  make  a  tender,  or  where,  in  strictness,  no  technical  tender 
ran  bo  made  (as  when  the  mortgage  secures  merely  stock- 
payments,  etc.),  the  offer  of  such  terms  as  will  make  the  suit 
unnecessary ;  or,  after  suit  brought,  of  such  terms,  together 
with  costs  accrued, — will,  upon  refusal  to  accept,  stop  the  run- 
ning of  interest,  and  render  the  plaintiff,  though  entitled  to  a 
decree,  liable  to  costs.1  A  subsequent  agreement  to  accept, 
starts  the  running  of  interest  as  if  no  tender  had  been  made, 
until  the  money  is  paid  or  brought  into  court." 

Premiums. 

§  378.  The  most  peculiar  incidents  of  the  transaction  of 
loan  between  the  building  association  and  its  members,  are 
those  of  premiums  and  fines.  It  is  sufficient,  in  this  connec- 
tion, to  state  the  general  principles  relating  to  them,  as  estab- 
lished by  the  decisions.5 

By  premium  is  meant  the  difference  between  the  nominal 
amount  of  the  advancement,  the  par  value  of  the  share  ad- 
vanced, and  the  sum  actually  received  by  the  borrowing  mem- 
ber. It  consists  of  a  gross  sum  of  money  agreed  to  be  paid 
by  the  borrower  for  the  accommodation,  to  be  deducted,  in 
ascertaining  the  amount  receivable  by  him,  from  the  total 
nominal  value  of  the  share  advanced,  or  loan  purchased.  The 
validity  of  its  reservation,  or  the  question,  whether  or  not  the 
borrower  may  be  held  to  his  agreement  to  pay  it,  depends 
upon  statutory  authority  conferred  upon  the  corporation,  to 
engage  in  this  particular  species  of  dealing  with  its  funds,  and 
is  to  be  strictly  judged  by  the  intention  of  the  Legislature,  ap- 
parent from  the  enactments,  as  well  as  by  its  direct  mandates 
and  inhibitions.  The  amount  of  the  premium  to  be  reserved 
upon  any  loan  must  be  ascertained,  exclusively,  by  fair  and 

(Pa.)  204.     See  also  Union  Building  1  Rep.  (Cine  Super.  Ct)  468  (see  ante, 

Loan  Association   of  New  Brans-  §  375);  McCahan  v.  The  Columbian 

wick  v.  The  Masonic  Hall  Associa-  Building  Association,  40  Md.  226. 

tion  of  New  Brunswick  etal.,  2  Stew.  *   Columbian    Building    Associa- 

(N.J.)  389;  and  observe  rule  of  com-  tion  of  East  Baltimore  No.   4,    v. 

putation  given  in  Robertson  v.  The  Crumb,  42  Md.  192.                *  Ib. 

American  Homestead  Association,  3  As  to  the  Law  of  Premiums, 

10  Md.    397;    Cincinnati    German  see  post,  Ch.  xiv.     Fines,  post,  Ch. 

Building  Association  ®.  Flach  et  al.,  xv. 


§380.J        INCIDENTS   TO    LOANS   OR   ADVANCEMENTS.  375 

open  competition  among  the  applicants  for  the  advancement, 
and  can  neither  be  arbitrarily  decided  upon  by  the  directors, 
nor  fixed  by  by-law,  to  the  prejudice  of  the  borrowing  mem- 
ber. No  interest  can  be  charged  upon  the  premium  con- 
tracted for,  except  by  statutory  permission. 

Fines. 

§  379.  Fines1  are  impositions,  in  the  nature  of  liquidated 
damages,  upon  members  neglecting  to  pay,  at  the  proper 
time,  to  the  society,  any  moneys  which  are  due  to  the  latter 
from  them.  The  validity  and  binding  effect  of  their  imposi- 
tion, generally,  depends  upon  statutory  authority  conferred 
upon  the  society  for  that  purpose,  expressly  or  by  implication, 
and  upon  by-law  regulation  establishing  the  rate  and  princi- 
ples which  are  to  govern  their  assessment.  As  the  amount  of 
any  particular  fine  is  left  to  the  association,  to  be  fixed  by  by-" 
law,  its  discretion  is  limited  only  by  the  rule,  that  the  lines 
must  be  reasonable,  certain,  and  notorious,  and  specified  by 
by-law.  Where  these  elements  concur,  the  liability  to  fines 
becomes  a  part  of  the  original  contract  of  membership  as  well 
as  of  loan,  and  can  be  enforced  upon  the  borrower's  bond  and 
mortgage,  although  fines  are  not  expressly  made  recoverable 
by  the  terms  thereof.  The  mortgage  will,  in  fact,  after  re- 
payment of  the  advance,  stand  as  a  security  for  future  fines. 
Pines  upon  fines,  and  fines  upon  interest  can  be  charged  only 
by  virtue  of  express  by-law  regulations  to  that  effect,  consist- 
ently with  the  statute. 

Security :  its  Nature  and  Kind. 

§  380.  The  authority  to  grant  loans  or  make  advancements 
to  its  members,  embracing  any  or  all  of  these  elements,  being 
given  to  the  building  association,  the  right  to  take  security 
for  the  performance  of  the  undertakings  which  form  the  law- 
ful consideration,  on  the  part  of  the  recipients  of  suc-h  loans 
or  advancements,  follows  by  necessary  implication.1  The 
seciirity  usually  required  in  building  associations  is  that  of 
bond  (or  note)  and  mortgage,  accompanied  by  an  assignment 
of  the  stock,  upon  the  strength  of  which  the  advance  is  made. 

1  See  Ch.  xv.  ing    and    Savings   Association    of 

9  Massey  ».  The  Citizens'  Build-     Paola,  22  Kas.  624. 


376  TilE  LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XIII. 

as  collateral.1  But  unless  the  statute  or  charter  be  unequivo- 
cal iii  its  requirement,  that  the  security  taken  shall  be  such, 
and  none  other,  the  building  association  has  the  right  to  take 
any  security  which,  in  the  ordinary  transactions  of  business, 
are  customary.*  The  borrower,  at  any  rate,  cannot  evade  his 
obligation  by  showing  a  deviation  from  the  rule  governing  the 
society,*  nor  will  any  equities  arise  therefrom,  as  against  the 
building  association,  in  favor  of  other  encumbrancers.4 

§  381.  This  entire  question  seems  well  settled  by  a  case 
reported  in  New  Jersey.6  The  Union  Building  Loan  Asso- 
ciation of  New  Brunswick  advanced  $50,000  to  the  Masonic 
Hall  Association  of  the  same  place,  which  held  215  shares  of 
the  building  association's  stock.  A  mortgage  was  executed 
conditioned  for  the  monthly  payment  of  $1  on  each  share, 
and  interest  on  $50,000  at  £  per  cent,  per  month,  until  the 
$50,000  should  be  paid.  In  case  of  default  for  three  months, 
that  sum  should  be  at  once  due  and  payable.  The  Masonic 
Hall  Association  also  assumed  to  assign  250  shares  of  stock  as 
collateral  security,  whilst,  in  reality,  it  never  acquired  more 
than  215  shares.  In  like  manner,  the  Empire  Building  and 
Loan  Association,  upon  an  advance  made  by  it  to  the  Masonic 
Hall  Association,  failed  to  obtain,  as  collateral  security,  the 
full  number  of  shares  of  stock  which  the  assignment  to  them 
purported  to  transfer.  Other  building  associations,  also  loan- 
ing to  the  Masonic  Hall  Association,  were  put  in  possession 
of  shares  of  stock,  by  way  of  assignment  as  collateral  security, 
to  the  full  extent  of  their  advancements.  On  distribution  of 

1  An  assignment  of  stock  in  a  made,  and  even  if  required  by  the 
building  association  may  be  shown  rules  of  the  association  to  be  made, 
to  have  been   for  the  purpose  of  in  absolute  form  "     Ginz  v.  Stumph 
collateral     security    only,    though  et  al  ,  73  Ind.  209. 
made,  and  even  if  required  by  the  9  Union  Building  Loan  Associa- 
rules  of  such  Association  to  be  made,  tion  of  New  Brunswick  t>.  Tin-  Ma- 
absolute  in  terms.     "The  fact  that  sonic    Hull    Association    et    al.,   2 
the    assignment    was    absolute    in  Stew.  (N.  J.)  389.     And  see  Massey 
terms  did  not  conclude  the  question,  n.  Building  Association,  sujrra. 
and  not  withstanding  the  declaration  3  Mutual   Life  Insurance  Co.  c. 
of  the   olHcers  of  the  association,  Wilcox,  7  N.  Y.  Weekly  Dig.  13. 
that  the  stock  could  not  be  assigned  4  Union  Building  Loan  Associa- 
as  a  security  or  collateral,  it  was  tion  «.  The  Masonic  Hall  Associa 
competent  for  the  parties  to  make  a  tion,  ubi  supra. 
transfer  for  such  purpose,   though  6  Ib. 


§  382.]        INCIDENTS  TO   LOANS    OR   ADVANCEMENTS.  377 

the  proceeds  of  the  sale  of  the  mortgaged  premises,  it  was 
contended,  that,  if  there  should  not  be  sufficient  to  pay  all 
the  mortgages  in  full,  the  above-named  building  associations 
ought,  under  the  circumstances,  in  equity,  to  be  postponed,  as 
to  the  payment  of  so  much  of  the  principal  of  their  respective 
claims,  and  interest  thereon,  as  was  unsecured  by  collateral 
security  of  stock,  until  after  the  demands  of  the  other  as.-<><  ia- 
tions  were  paid.  "  This  claim  of  equity,"  says  the  court,  "  is 
based  upon  the  assumption  that  the  complainants  and  the 
Empire  Association,  as  between  them  and  the  other  associa- 
tions which  obtained  collateral  security  of  stock  to  the  full 
extent  of  these  loans,  were  bound  to  obtain  such  security  to  a 
like  extent.  There  was  no  agreement  between  the  mortga- 
gees that  any  collateral  security  whatever  should  be  obtained, 
but  it  is  insisted  that  an  implied  agreement  arose  from  the 
nature  of  the  organization,  business,  and  objects  of  the  lenders 
of  the  money.  Such  an  implication,  however,  did  not  arise. 
A  building  loan  association  may  lawfully  lend  its  money  to  its 
members  or  other  persons,  on  adequate  and  proper  security, 
in  the  ordinary  way,  instead  of  the  way  peculiar  to  such  in- 
stitutions. That  they  have  failed  to  do  so  is  obviously  to 
their  disadvantage  to  the  extent  of  the  failure,  for  they  have 
so  much  less  security  for  their  debt ;  but,  in  the  absence  of 
any  agreement,  there  was  no  obligation  upon  them,  in  equity, 
as  between  them  and  the  other  building  loan  associations,  to 
obtain  such  security." 

Joint  Security  of  Member  and  Outsider. 

§  382.  Although  a  building  association  is  not  permitted  to 
lend  money  to  outsiders  upon  the  terms  and  under  the  reser- 
vations lawful  in  advancements  to  members,1  there  is  no  ob- 
jection to  its  taking  the  joint  obligation,  or  mortgage,  of  a 
member  and  an  outsider  for  an  advance  made  to  the  former.* 
And  such  obligation  will  then  be  enforceable  against  both,  ac- 
cording to  its  terms  and  effect  upon  the  member ;  as,  where  a 
wife,  having  the  power  of  mortgaging  her  separate  property 
for  the  debt  of  her  husband,  gives  a  mortgage  to  a  building 

1  See  ante,  §§313-318.  Paola.  2?  K:is.  624;  Relief  Saving 

*  Massey  v.  The  Citizens'  Build-     Fund  Association  r.   Longshore  et 
ing    and    Savings    Association    of     al.,  8  Luz.  Leg.  Keg.  199. 


378  THE   LAW  OF  BUILDING   ASSOCIATIONS.       [CH.  XIII. 

association  for  a  loan  made  to  him,  as  a  member  thereof,  the 
mortgage  stands  for  his  entire  undertaking.1 

Reservations  Legalized  in  the  Several  States. 

§  383.  These  are  the  ordinary  features  of  building  associ- 
ation loans.  The  variations  to  which  their  details  are  subject 
depend  upon  the  state  of  the  law  obtaining  in  different  local- 
ities. The  right  of  the  association  to  demand  and  receive  se- 
curity for  the  consideration  of  its  advancement  to  a  member^ 
in  particular  for  the  payment  of  dues,  has,  it  seems,  never  been 
questioned  :  although  the  character  and  terms  of  the  security 
taken  must,  in  order  to  escape  the  taint  of  usury,  conform  with 
the  requirements  of  the  statute  under  which  the  society  is  in- 
corporated, and  with  those  of  its  own  by-laws.*  Nor  is  there 
any  question  as  to  the  propriety  of  reserving  interest  on  the 
amount  actually  advanced,  either  as  such,  or  in  the  shape  of 
"  redemption-money,"  according  to  the  method  prescribed  in 
the  by-laws.  But  the  charging  of  interest  upon  the  premiums 
offered  for  precedence  in  the  taking  of  a  loan  has  been  dis- 
tinctly held  illegal  in  Ohio,'  Iowa,4  and  Maryland  ; 6  whilst  in 
Pennsylvania,  since  1859,  it  is  authorized  by  statute  and  held 
valid.8  The  premium  itself  has  been  almost  universally  cou- 

1  Juniata  Building  and  Loan  As-  3  Forest. City  United  Land  and 
sociation  ».  Mixell,  3  Norris  (84  Pa.  Building  Association  v.   Gallagher 
St.),  313,  and  see  ante,  §§  317-318.  et  al.,  25  Ohio  St.  208;  Risk  v.  Del- 
The  peculiarities  of  a  building  asso-  phos  Building  and   Savings  Asso- 
ciation mortgage,  whilst  not  mate-  elation,  31  Id.  517. 
rial  at  this  point,  are  such  as  to  re-  4  Hawkeye  Benefit  &  Loan  Asso- 
quire    more    detailed    examination  ciation  T.  Blackburn,  48  Iowa,  285; 
than  can  be  given  in  a  chapter  not  Burlington  Mutual  Loan  Associa- 
exclusively  devoted  to  that  subject,  tion  v.  Heider  et  al. ,  55  Id.  434. 
See,  therefore,  post,  Ch.  xvi.  6  Baltimore  Permanent  Building 

9  Massey  v.  The  Citizens'  Build-  and  Land  Society  v.  Taylor.  41  Md. 

ing    and    Savings    Association    of  409;  Oak  Cottage  Building  Associa- 

Paola,  22  Kas.  624;  Shannon  v.  The  tion  T.  Eastman  and   Rodgcrs,  31 

Howard  Mutual  Building  Associa-  Md.  561;  Williar  t.  The  B.-iltimore 

tion  of  Baltimore,  36  Md.  383;  Bir-  Butchers'  Loan  and  Annuity  Asso- 

mingham  et  al.   «.    The  Maryland  ciution,  45  Id.  546;  Birmingham  et 

Land   and  Permanent    Homestead  al.  v.  The  Maryland  Land  and  Per- 

Association,  45  Id.  541;  Hamilton  manent  Homestead  Association,  45 

Building  Association  t>.  Reynolds,  Id.  541. 

5Duer(N.Y.),  671;  Franklin  Build-  6  [Building]  Association  v.  Neu- 

ing  Association  v.  Mather,  4  Abb.  rath,  2  W.  N.  C.  (Pa  )  95;  Building 

Pr.  (N.  Y.)  273.  Association  v.   George,  3   Id.   239; 


§  383.]       INCIDENTS  TO   LOANS  OB  ADVANCEMENTS.  379 

sidered  allowable/  the  only  exceptions  being  in  Kentucky,* 


Selden  t>.  Reliable  Savings  and 
Building  Association,  32  P.  F. 
Smith  (Pa. ),  336.  As  to  the  doctrine 
previous  to  1859,  see  ante,  §  351; 
and  post,  ch.  xx. 

1  Ib. ;  Delaware  Building  Asso- 
ciation v.  Keller,  2  W.  N.  C.  (Pa.) 
29;  Jarrett  v.  Cope,  68  Pa.  St.  67; 
Relief  Saving  Fund  Association  v. 
Longshore  et  al.,  8  Luz.  Leg.  Reg. 
(Pa.)  199;  Franklin  Building  Asso- 
ciation v.  Marsh,  5  Dutch.  (N.  J.) 
225 ;  Hobokeu  Building  Association 
v.  Martin,  2  Beas.  (N.  J.)  428;  Som- 
erset County  Building  Loan  and 
Saving  Association  v.  Canman  and 
Vandervere,  3  Stock.  (N.  J.)  282; 
Red  Bank  Association  v.  Patterson, 
12  C.  E.  Gr.  (K  J.)  223;  Clarkville 
Building  and  Loan  Association  v. 
Stephens,  11  Id.  351;  Citizens'  Mu- 
tual Loan  and  Accumulating  Fund 
Association  v.  Webster  et  al.,  25 
Barb.  (N.  Y.)  263;  City  Building 
and  Loan  Co.  v.  Fatty,  1  Abb.  App. 
Dec.  (N.  Y.)  347;  West  Winsted 
Savings  Bank  and  Building  Asso- 
ciation v.  Ford,  27  Conn.  282;  Same 
«.  Rice,  Id.  293;  The  Peoples'  Sav- 
ings Bank  and  Building  Associa- 
tion v.  Collins,  Id.  145;  Forest  City 
United  Land  and  Building  Associa- 
tion v.  Gallagher  et  al.,  25  Ohio  St. 
208;  Hagerman  et  al.  v.  The  Ohio 
Building  and  Savings  Association, 
25  Id.  186;  The  Licking  County 
Savings,  Loan  and  Building  Asso- 
ciation v.  Bebout's  Adm'r  et  al.,  25 
Id.  252;  Robertsons.  The  American 
Homestead  Association,  10  Md.  397; 
Shannon  v.  The  Howard  Mutual 
Building  Association  of  Baltimore, 
36  Md.  383;  Bowker  T.  Mill  River 
Loan  Fund  Association,  7  Allen 
(Mass.)  100;  Merill  v.  Mclntire,  18 
Gray  (Mass.),  157;  Barker  v.  Bige- 
low,  15  Id.  180;  Delano  v.  Wild  et 


al.,  6  Allen  (Mass.),  1;  Shannon,  et 
al.,  Trustees  Manchester  Loan  and 
Fund  Association,  v.  Dunn,  43  N.H. 
194  (the  last  four  cases  being  of  un- 
incorporated associations) ;  Hawk- 
eye  Benefit  &  Loan  Association  v. 
Blackburn,48  Iowa,  385;  Burlington 
Mutual  Loan  Association  v.  Heider 
et  al.,  55  Id.  424;  Massey  v.  The  Citi- 
zens' Building  and  Saving  Associa- 
tion of  Paola,  22  Kas.  624;  Salina 
Building,  Savings  and  Trust  Asso- 
ciation v.  Nelson  et  al.,  Ib.  751; 
Mulloy  v.  The  Fifth  Ward  Building 
Association,  2  McArthur  (Supr.  Ct. 
D.  C.),  594;  Pabst  v.  Economical 
Building  Association,  1  Id.  385; 
White  v.  Mechanics'  Building  Asso 
elation,  22  Grattan(Va.),  233;  Win- 
chester Building  Association  V.  Gil- 
bert et  al.,  23  Id.  787;  McLaughlin 
et  al.  v.  The  Citizens'  Building  Loan 
and  Savings  Association,  62  Ind. 
264;  Shaffrey  v.  The  Workingmeu's 
Savings,  Loan  and  Building  Asso- 
ciation, 64  Id.  600;  Bibb  County 
Loan  Association  q.  Richards,  21 
Ga.  592;  Parker®.  The  Fulton  Loan 
and  Building  Association,  46  Id.  166 
(the  admission  in  the  Georgia  cases 
is  somewhat  restricted,  partly  de- 
claring it  to  be  a  question  for  (he 
jury,  whether  there  was  a  bona  fide 
transaction  calculated  to  serve  the 
purposes  of  the  Legislature  in  incor- 
porating the  society,  or  a  mere 
breach  of  the  usury  laws).  And  see 
English  cases,  supra.  See  §  338. 

*  Gordon,  etc.,  v.  Winchester 
Building  nnd  Accumulating  Fund 
Association,  12  Bush,  110:  Herbert, 
etc.  v.  The  Kenton  Building  and 
Savings  Association  of  Covington, 
11  Id.  296:  the  transaction  is  treated 
as  a  mere  loan  at  usury,  which,  un- 
der the  Const  it  ut  ion,  the  Legislature 
could  not  authorize. 


380 


TI1K    LAW    OF   BUILDING    ASSOCIATIONS.       [CH.  XIII. 


Nebraska,1  North  Carolina,"  South  Carolina,'  and  Tennes- 
see.4 In  those  States,  lines,  also,  are  not  collective  from 
the  borrower,  and  in  the  District  of  Columbia,'  they  have 
been  held  irrecoverable  on  equitable  grounds.'  In  other 
parts  of  the  country,  they  appear  to  be  allowed,  both  on  dues 
proper  and  on  interest,  except  that  in  Ohio  they  must  be  con- 
fined to  the  former  only/  In  Pennsylvania,  lines  upon  lines 
seem  to  be  legal,  if  specified  in  the  by-laws.8  It  is  also  gen- 
erally conceded  to  be  proper  to  include  in  the  contract  stip- 
ulations for  the  payment  of  ground-rent,  taxes,  insurance,  and 
similar  charges,  which  may  then  be  recovered,  together  with 
the  balance  of  the  debt.* 


1  The  Lincoln  Building  and  Saving 
Assoc'n,  appellee,  v.  Graham,  appel- 
lant, 7  Neb.  173;  Same  v.  Benjamin 
and  Benjamin,  appellants,  Ib.  181. 

1  Mills  et  al.  v.  The  Salisbury 
Building  and  Loan  Association,  75 
N.  C.  292;  Latham  and  wife  v.  The 
Washington  Building  and  Loan  As- 
sociation, 77  Id.  145;  Vann  and  wife 
v.  The  Fayetteville  Building  and 
Loan  Association,  75  Id.  494;  Han- 
ner  et  al.  v.  The  Greensboro  Build- 
ing and  Loan  Association,  78  Id. 
188;  and  see  Overby  v.  Fayetteville 
Building  Association,  81  Id.  56; 
Smith  and  wife  v.  The  Mechanics' 
Building  and  Loan  Association,  73 
Id.  372.  In  the  latter  case,  the 
building  association  being  incorpo- 
rated by  special  act  authorizing  pre- 
miums, etc.,  they  were  not  held  il- 
legal; but  the  mortgage  was  not 
such  as  could  be  enforced  under  the 
charter.  See  Ch.  xvi. 

8  Columbia  Building  and  Loan 
Association  V.  Bellinger,  12  Rich. 
Eq.  (S.  C.)  124. 

4  Martin  «.  Nashville  Building  As- 
sociation, 2  Cold.  (Tenn.)  418.  The 
principle  in  these  States  is  to  regard 
the  transaction  as  a  loan,  and  to  find 
nothing  in  the  statutes  apparently 
contemplating  stich  reservations. 

"Mulloy  v.  Fifth  Ward  Buil  ling 


Association,  2  McArthur  (Supr.  Ct. 
D.  C.),  494;  Pabst  v.  Economical 
Building  Association,  1  Id.  385. 

6  See  post,  §§  401-403. 

7  Forest  City   United   Land  and 
Building  Association  v.  Gallagher, 
25  Ohio  St.  208. 

8  Building  Association  v.  Schuller, 
3  W.  N.  C.  (Pa.)  431. 

9  Robertson    v.     The    American 
Homestead    Association,    10    3Id. 
397;  Hanner  et  al.  v.  The  Greens- 
boro Building  and  Loan  Associa- 
tion, 78  N.  C.  188;  Overby  and  wife 
v.  The  Fayetteville  Building  and 
Loan  Association,  81  Id.  56.     It  is 
said  in  Illinois  that  a  building  asso- 
ciation, authorized  by  its  charter  to 
make  a  loan  and  provide  for  its  se- 
curity, may,  as  an  incident  of  such 
right,  contract  to  insure  the  proper- 
ty taken  as  security;  and  that,  upon 
failure  to  do  so,  and  loss  by  fire,  an 
action  will  lie  against  the  society  for 
breach  of  the  agreement  to  insure; 
the  measure  of  damages,  however, 
being,  not  the  sum  agreed  upon  as 
insurance,  but  the  dividend  the  in- 
surance company  would  have  been 
able  to  pay  in  case  the  insurance 
had  been  effected  before  loss.     And 
it  was  further  said,  that,  where  the 
secretary  of  the  building  association 
had  been  making  similar  contracts 


§  384.]       INCIDENTS  TO   LOANS   OR   ADVANCEMENTS.  381 

"  Loan  "  Construed  to  Mean  "  Amount  Actually  Advanced." 

§  384.  Subject,  then,  to  the  various  modifications  which 
may  be  imposed  by  the  various  statutes,  the  '  loan '  of  the 
building  association  to  its  member  includes,  without  becoming 
usurious,  all  these  different  items,  stock-payments,  interest, 
premiums,  and  fines,  besides  the  customary  charges  for  insur- 
ances, taxes,  etc.  But  a  narrower  significance  is  given  to  that 
word,  whether  used  in  statutes  or  by-laws,  where  justice  and 
the  purposes  of  the  enactment  require  it.  Thus,  where  the 
Act  of  Assembly  ordained,  that,  in  case  of  recovery  of  the 
loan  by  process  of  law,  when  the  amount  collected  by  or  dis- 
tributed to  the  association  exceeds  "  the  amount  of  the  loan 
taken  by  the  borrower,"  with  interest  and  charges,  the  excess 
recovered  beyond  the  amount  required  to  pay  the  loan,  with 
interest  and  charges,  shall,  after  the  money  has  been  reloaned 
(which  shall  be  at  the  next  stated  meeting),  be  returned  to 
the  borrower  from  whom  the  money  was  collected,  or  his  or 
her  legal  representatives  ;  the  reloan  to  be  made,  if  the  stock 
was  issued  in  series,  only  to  the  stockholders  of  the  same 
series,  and,  in  case  the  premium  offered  for  the  reloan  be 
greater  than  that  originally  given  by  the  defaulting  borrower, 
the  amount  of  the  original  premium  only  to  be  paid  over  by 
the  association  ;  it  was  held  that  the  words  "  amount  of  loan 
taken  by  the  borrower"  must  be  construed  to  mean  "  the 
sum  of  money  actually  paid  to,  or  received  by,  the  bor- 
rower." '  "  The  clear  intent  of  the  act  is  not  to  require  any 
borrower  to  pay  the  premium  on  a  loan  for  a  greater  number 
of  years  than  he  shall  retain  it.  The  corporation  shall  not,  on 
a  reloan  for  a  premium,  keep  both  the  original  and  second 
premium  for  the  same  period  of  time.  If,  however,  the 
second  premium  be  greater  than  the  first,  the  second  proviso 
permits  the  corporation  to  retain  the  greater  and  repay  the 
lesser  to  the  first  borrower  from  whom  the  corporation  has 
received  it.  To  give  due  effect  to  the  intent  of  the  statute, 

with  others  for  some  time,  having  no  acted  with  the  knowledge  of  the 

personal    interest   in    doing  so  as  directors   and  was    authorized    to 

agent,  etc.,  of  the  insurance  com-  make     such     contracts.      Chicago 

pany,  and  the  building  association  Building  Association  v.  Crowell,  65 

had  received  the  benefits  accruing  111.  453. 

from  such  contracts  without  objec-  '  Flounders  r.  Hawley,  78  Pa,  St. 

tion,  it  might  be  inferred  that  he  45. 


889 


THE   LAW   OP   BUILDING   ASSOCIATIONS.      [CII.  XIII. 


iii  case  of  a  recovery  by  process  of  law  before  the  loan 
matures,  we  must  construe  "  the  amount  of  loan  taken  by  the 
borrower"  to  mean  the  sum  of  money  actually  paid  to  or  re- 
coived  by  him.  As  this  part  of  the  section  does  not  go  into 
effect  until  after  the  corporation  shall  have  had  an  opportunity 
of  reloaning  the  sum  thus  recovered  at  a  greater  rate  of  in- 
terest than  the  original  loan,  this  construction  protects  both 
the  first  borrower  and  the  corporation."  l 

§  385.  A  similar  meaning  has  been  given  by  the  courts  of 
Maryland  and  Ohio,  to  the  words  "  loans  advanced,"  *  "  sum 
paid  or  advanced,"'  "amount  borrowed,"4  in  restricting  the 
charging  of  interest,  under  statutes  or  by-laws,  to  the  amount 
of  cash  actually  received  by  the  borrower,  instead  of  allowing 
interest  to  be  taken  upon  the  whole  debt,  including  the  pre- 
mium. But,  where  the  by-laws  provide,  that,  in  case  a  share- 
holder who  had  received  a  loan  shall  die,  "  his  or  her  heirs  or 
legal  representatives  may  return  the  same  to  the  association," 
and  receive  from  it  the  value  of  the  stock  of  the  decedent,  as 
the  same  was  assessed  at  the  annual  meeting  of  the  association 
1  Mercur,  J.,  in  Flounders  n.  Haw-  not  grossly  in  excess  of  the  real  loss 
ley,  78  Pa.  St.  45  (48).  A  principle 
somewhat  similar  to  that  expressed 
above,  and  in  the  section  of  the 
statute  referred  to,  seems  to  be  at 
the  bottom  of  the  rule  embodied  in 
the  constitutions  of  building  associa- 
tions, and  adopted  by  the  courts  in 
Georgia,  in  the  case  of  a  defaulting 
borrower;  he  must  pay  back  the 
money  he  got,  with  such  an  advance 
upon  it  as  will  enable  the  company, 
at  the  lower  or  higher  rates,  as  the 
case  may  be,  at  which  money  is  sell- 
ing, to  get  the  same  monthly  inter- 


sustained  by  the  company  by  reason 
thereof.  Ocmulgee  Building  and 
Loan  Association  v.  Thomson,  52 
Ga.  427.  And  in  Richards  v.  The 
Bibb  County  Loan  Association,  24 
Ga.  198,  it  is  said  that  the  rate  ob- 
taining on  the  day  of  judgment  be- 
ing taken  as  the  guide  in  making  the 
estimate,  if,  on  the  day  of  sale,  that 
estimate  was  no  longer  correct,  the 
party  affected  by  the  change  might 
have  the  judgment  modified  accord 


est  upon  it  as  he  ought  to  pay  at  the 
rates  he  got  it  at ;  to  be  ascertained 
by  deducting  from  the  par  value  of 
the  shares,  such  a  per  cent,  of  the 
same  as  advances  were  sold  or  al- 
lotted to  members  at  the  last  regu- 
lar monthly  meeting  next  before  the 
judgment,  and  adding  to  this  the 
dues  on  such  share  for  each  default 
up  to  such  meeting,  and  any  fines 
that  may  be  due  for  such  default, 


*  Forest  City  United  Land  and 
Building  Association  v.  Gallagher 
et  al.,  25  Ohio  St.  208. 

8  The  Baltimore  Permanent 
Building  and  Land  Society  v.  Tay- 
lor, 41  Md.  409. 

4  Oak  Cottage  Building  Associa- 
tion v.  Eastman  and  Rodgers,  31  Md. 
556.  See  also  Hawkeye  Benefit  & 
Loan  Association  v.  Blackburn,  48 
Iowa,  385;  Burlington  Mutual  Loan 
Ass'n  r>.  Heider  et  al.,  55  Id.  424. 


§  386.]       INCIDENTS  TO   LOANS   OR  ADVANCEMENTS.  383 

i  in  mediately  preceding  his  decease,  "or  may  continue  to  pay 
interest  and  monthly  dues,  and  become,  in  all  respects,  a 
member  of  the  association  until  the  same  shall  terminate ;" 
it  was  held  that  if  the  heirs  or  legal  representatives  of  the 
deceased  shareholder  and  borrower  elect  to  return  the  loan, 
the  amount  to  be  returned  is  the  money  actually  received, 
together  with  the  premium  bid  for  the  preference,  and  not 
only  the  amount  actually  received  by  the  decedent.  Any 
other  construction,  it  was  said,  would  require  a  surrender  by 
the  association  of  the  benefits  of  the  contract  by  which  the 
decedent  had  obligated  himself  to  it, — a  surrender  which 
had  not  been  contemplated  or  reserved  in  the  contract.1 

Binding  Force  of  Contract  of  Loan,  etc.,  Made  in  Pursuance  of  Charter 
and  Statutory  Powers. 

§  386.  This  contract,  whatever  it  may  lawfully  be,  under 
the  particular  statutes  governing  the  building  association,  is 
absolutely  binding  upon  the  member  entering*  into  it,  as 
well  as  upon  his  guarantor  or  co-obligor,3  and  upon  all  who 
stand  in  his  shoes.4  It  cannot  be  varied,  without  the  bor- 
rower's consent,  by  any  action  or  dereliction  of  the  building 
association  or  its  members ;  *  but  it  may,  it  seems,  under 
certain  circumstances,  become  partially  abrogated  by  the 
premature  dissolution  of  the  society  ; '  and  it  is  a  right 
which  every  borrower  has,  by  virtue  of  his  membership,  to 
cancel  it  by  discharging  his  obligation  to  the  society  at  any 
time  in  advance  of  its  maturity.7  The  contract  of  loan  itself 
contemplates  no  discharge  before  that  time ;  and  the  bor- 
rower can  rid  himself  of  his  obligation  only  by  giving  to  the 

1  The   Licking  County  Savings,  Relief  Saving  Fund  Association  v. 

Loan    and  Building  Ass'n  v.   Be-  Longshore  etal.,  8  Luz.  Leg.  Reg. 

bout's  Adm'r  et  al.,  25  Ohio  St.  (Pa.)  199. 

252.  4  A  purchaser  of  property  subject 

9  Hoboken  Building  Association  to  a  building  association  mortgage 

v.  Martin,  2  Beas.  (N.  J.)428;  Wat-  is  liable  to  make  monthly  payments, 

kins  v.  The  Workingmen's  Building  etc. ,  as  stipulated  therein.    Sec  post, 

and  Loan  Association,  10  W.  N.  C.  §  485.     Nor  can   he  complain   of 

(Pa.)  414;  38  Leg.  Int.  333;  97  Pa.  usury  in  the  transaction,  where  it 

St.  514.  was  in  accordance  with  the  statute 

3  Juniata  Building  Association  v.  legalizing  such  contracts. 

Mixell,  84  Pa.   St.  313;  Massey  t>  •  See  ante,  §§  169-170,  289. 

The  Citizens'  Building  and  Saving  •  See  post.  g§  496-503. 

Association  of  Paola,  22  Kas.  624;  '  See  ante,  ££  152-153. 


384  THE   LAW   OF  BUILDING   ASSOCIATIONS.      [CH.  XIII. 

society  an  exact  present  equivalent  of  what,  by  following 
out  the  terms  of  the  contract,  would,  during  the  running  of 
it,  pass  from  the  member  to  the  society,  subject  to  such  re- 
ductions as,  under  the  statutes,  or  by  special  compromise, 
may  be  granted.1  The  apparent  oppressiveness  of  the  bar- 
gain, in  the  absence  of  fraud  or  misrepresentation,  is  not  a 
ground  for  relieving  the  borrower.'  In  a  case  arising  in 
New  York,'  where  it  was  urged  upon  the  court,  under  all 
the  circumstances  of  the  case,  Birdseye,  J.,  says :  ''  That  the 
defendant  is  required  to  pay  considerable  sums  of  money, 
every  month,  and  that  these  payments  may  be  increased  by 
fines  in  case  of  default,  and  that  such  fines  may  be  made 
heavier  for  a  continued  default,  forms  no  sufficient  reason  for 
declaring  the  contract  void,  in  the  whole,  or  even  jrro  tanto. 
It  is  not  shown  or  pretended,  except  in  the  arguments  of 
counsel  that  the  defendant  did  not  fully  understand  the  na- 
ture of  the  bargain  made  ;  or  that  he  could  not  have  calcu- 
lated the  precise  amount  he  would  be  bound  to  pay ;  or  that 
lie  has  been  in  any  manner  deceived,  defrauded,  or  misled, 
either  in  joining  the  association,  or  bidding  for  the  shares  and 
paying  his  premium.  His  engagement  may  be  an  onerous 
one.  But  all  his  associates  entered  into  the  same  engage- 
ment and  assumed  the  same  burden.  For  aught  that  ap- 
pears, they  have  borne  those  burdens,  and  made  all  their 
payments  regularly,  in  the  expectation  that  the  defendant  and 
every  other  member,  would  do  the  same,  and  thus  the  wind- 
ing up  of  the  association,  and  the  termination  of  the  tax  upon 
them,  would  be  speeded.  To  release  the  defendant  from  his 
contract,  or  any  part  of  it,  is  only  imposing  on  each  of  them 
so  much  greater  burden,  and  requiring  a  proportionate  exten- 
sion of  payments,  to  an  early  relief  from  which  they  are 
justly  entitled.  The  defendant  must  continue  to  pay  into 
the  common  fund  the  sum  he  agreed  to  pay ;  and  if  the  other 
members  of  the  association  comply  with  their  agreement,  all 
of  them  will  be,  at  no  very  distant  day,  relieved  from  the 

1  See  ante,  §§  154-164,  169-170.  Association,  10  W.  N.  C  (Pa.)  414; 

9  Citizens'  Mutual  Loan  and  Accu-  38  Leg.  Int.  333;  97  Pa.  St.  514. 

initialing  Fund  Association  v.  Web-  3  Citizens'  Mutual  Loan  and  Ac- 

ster,  25  Barb.  (N.  Y.)  263;  Watkins  cumulating  Fund  Association,  uZA 

«.  Workingmen's  Building  and  Loan  supra. 


§  387.]       INCIDENTS  TO   LOANS   Oil  ADVANCEMENTS.  385 

necessity  of  making  further  contributions."  "  They  may  not 
then  have  realized  the  benefits  they  worked  for.  They  will, 
perhaps,  have  learned  that  the  proprietor  is  the  best  guardian 
of  property ;  that  the  making  of  extravagant  gains  involves 
great  risks  or  great  burdens;  and  that  the  steady  accumula- 
tions of  honest  industry  are  the  surest  way  to  wealth.  But 
they  will  have  met  with  no  losses  which  a  reasonable  pru- 
dence would  not  have  enabled  them  to  foresee  and  measure.'5' 

Practical  Results  of  Building  Association  Loans. 

§  387.  As  to  the  practical  working  of  building  associa- 
tions, as  shown  in  these  transactions  of  loan  and  advancement, 
it  does  not  cover  the  whole  ground,  to  say,  with  Strong,  J.,1 
that  they  are  "  but  agencies  for  obtaining  usurious  interest 
from  the  necessitous  and  unwary ;"  or,  with  Whelpley,  C.  J.,a 
"  that  they  are  but  organized  societies  of  legalized  usurers,  and 
that,  by  their  operation,  the  investments  of  needy  members 
are  absorbed  by  the  usury  paid  to  those  more  able.  The  only 
advantage  secured  is  enabling  borrowers  to  repay  a  loan  by 
monthly  payments  somewhat  within  their  means.  In  all  ordi- 
nary cases,  it  is  a  most  expensive  way  of  obtaining  a  loan, 
and  when  it  is  obtained,  the  borrower  is  utterly  unable  to  tell 
what  rate  of  interest  he  is  to  pay,  or  how  soon  his  debt  will 
be  extinguished."  It  may,  with  equal  reason,  be  said  that 
"  these  associations  are  founded  on  mathematical  calculations, 
and  a  close  scrutiny  of  their  charters  will  show  that  their 
rules  are  based  upon  the  highest  principles  of  equity  and  fair- 
ness. Their  fundamental  idea  is,  that  one  who  has  the  privi- 
lege of  paying  money  advanced  to  him,  in  small  sums. 
monthly,  can,  in  consequence  of  the  slight  strain  the  payment 
makes  on  his  resources  each  month,  pay  a  large  per  cent,  for 
the  use  of  that  money,  and  the  whole  scheme,  adopting  this 
as  its  fundamental  idea,  is  based  upon  fairness  and  equity  to 
all  parties."'  None  of  these  statements  do  exact  justice. 
Aside  from  the  legal  aspect  of  the  transaction,  the  theory  of 
a  building  association  loan  is  different  from  that  of  other  loans. 

1  North  America  Building  Ass'n  3  Ocmulgee  Building  and    Loan 

*.  button,  35  Pa.  St.  463  (468).  Association    ».   Thomson,   52   Ga. 

9  Franklin    Building   Association  427. 
t>.  Marsh,  5  Dutch.  (N.  J.)  225. 


386  THE  LAW  OF  BUILDING   ASSOCIATIONS.      [CH.  XIII. 

Theoretically,  and,  in  most  cases,  practically,  the  borrowing 
member  of  a  building  association  aims  at  becoming  the  owner 
of  property  by  means  of  small  payments,  spread  over  a  num- 
ber of  years, — payments  corresponding  as  near  as  possible  to 
the  rent  he  would  otherwise  be  obliged  to  pay  for  the  same 
property.  Now,  private  mortgagees,  or  money-lending  corpo- 
rations other  than  these  societies,  would,  in  the  vast  majority 
of  cases,  object  to  such  small  partial  payments ;  and  whilst  it 
is  true  that  the  borrower  might  put  by  small  sums  until  the 
amount  would  be  sufficient  to  pay  the  whole  debt, — yet,  on  the 
one  hand,  in  doing  so  he  would  be  the  loser  to  the  extent  of 
the  interest  the  association  allows  him  on  his  payments,  and 
which  he  could  not  get  elsewhere  ;  and,  upon  the  other  hand, 
the  likelihood  is  that  those  small  sums  would  not  be  put  by, 
because  such  a  course  practically  involves  a  greater  amount 
of  self-denial  than  most  persons  possess.  In  this  respect, 
the  pressure  exerted  by  the  system  of  fines  and  penalties 
adopted  by  building  associations  operates,  in  point  of  fact, 
most  beneficially  for  the  member.  And  furthermore, — and 
this  is,  to  a  poor  man,  one  of  the  greatest  advantages  in  bor- 
rowing from  a  building  association, — he  can  obtain  a  larger 
sum,  in  proportion  to  the  value  of  the  property,  than  he  could 
raise  upon  it  from  other  sources.  "  Private  mortgagees  are 
not  advised  to  lend  more  than  two-thirds  of  the  value  of  land, 
and  one-half  of  houses ;  but  building  societies  can  afford  to 
advance  a  much  larger  proportion,  indeed,  to  nearly  the  value 
of  the  property,  partly  because  the  principal  sum  at  once 
begins  to  be  reduced  by  means  of  the  periodical  payments,1 
and  partly  also  because  these  societies,  being  co-operative 
associations,  may  recoup  losses,  arising  from  bad  securities 
here  and  there,  from  general  funds  and  resources."  * 

1  This  statement  is  not  perfectly  up,   for  the  claim  of   the  society 
accurate,   because  payments  upon  against  him  on  account  of  his  ad- 
stock  are  not,  ipso  facto,  payments  vancement ;  ante,   §§  326-337),    is 
to  the   mortgage.     See    post,   Ch.  the   result    expected    to    happen." 
xvii.,  §§  452-454..     But,  "in  a  gen-  State,    Washington    Building   and 
eral  way,  this  view  may  seem  fair,  Loan  Association,  pros.,  v.   Horn- 
because  an  exchange  of  one  for  the  backer,  13  Vr.  (N.  J.)  635. 
other  (the  accumulation  of  stock-  *  See  Barry,  on   Building  Socie- 
payments,  profits,  etc.,  standing  to  ties,  §  103. 
the  member's  credit  upon  winding 


§  389.]  PEEMIUM.  387 

CHAPTER  XIV. 

PKEMIUM. 

§  888.  Definition  of  premium  generally. 

§  389.  Its  true  nature  and  method  of  payment. 

jj  391.  For  purposes  of  computation  must  be  treated  as  a  deduction. 

§  392.  Premium  must  ordinarily   be  a  gross  amount  per  share,  not 

merely  increased  interest. 
§  394.  Premium    must    be    fixed    by    free    competition.      Minimum 

premium. 

§  398.  Interest  upon  premium. 
§  399.  Abatements,  discounts,  and  remissions  on  premium. 

Definition  of  Premium  Generally. 

§  388.  "  The  premium  is  a  bonus  charged  to  a  stockholder 
wishing  to  borrow,  for  the  privilege  of  anticipating  the  ulti- 
mate value  of  his  stock,  by  obtaining  the  immediate  use  of 
the  money  his  stock  will  be  worth  at  the  winding  up."1 
In  effect,  it  is  the  conventional  difference  between  the  par 
value  of  the  share  advanced,  and  the  amount  actually  received 
by  the  borrower.  It  is  not,  therefore,  a  cash  payment  which 
he  is  obliged  to  make  upon  obtaining  his  preference ;  nor 
can  it  properly  be  said  to  be  a  deduction  made  at  the  time 
from  any  money  belonging  to  him. 

Its  True  Nature  and  Method  of  Payment. 

§  389.  The  true  nature  of  the  premium  appears  most 
clearly  where  the  form  of  the  transaction  of  loan  is  that  of  a 
sale  to,  and  redemption  by,  the  society  of  the  shares  held  by 
the  member,  which  indeed  appears  to  be  the  oldest  method. 
His  duty  as  a  member  being  to  keep  up  his  payments  to  the 
society,  until  it  is  ready  to  wind  up,  he  offers  to  sell  to  it  his 
prospective  interest,  in  right  of  his  shares,*  in  its  final  accu- 
mulations, whilst,  at  the  same  time,  binding  himself  to  the 
continuance  of  those  payments  which  are  intended  eventually 
to  raise  the  shares  to  their  fixed  par  value.  A  number  of  share- 

1  Wrigley,     The    Workingman's  his  membership  and  extinction  of 

Way  to  Wealth,  p.  67.  the  stock,  pro  tanto  ;  results  which 

*  It  seems  to  be  entirely  inaccu-  do  not  occur.     See  ante,  §§  146-148, 

rate  to  say  that  he  sells  his  shares;  and  cases  there  examined, 
for  that  implies  a  relinquishment  of 


388  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XIV. 

holders  being  in  competition  for  the  same  advancement,  the 
society  selects  him  who  will  relinquish  to  it  the  prospective 
dividend  upon  his  shares  in  exchange  for  the  lowest  present 
cash  payment  per  share.  The  borrower  thus  sells  the  future 
dividend  upon  his  shares  at  a  discount ;  the  society,  its  funds 
at  a  premium ;  but  there  is  neither  a  transfer  of  money  to 
the  society,  to  cover  the  premium,  nor  a  deduction  from  any- 
thing belonging  to  the  borrower  to  liquidate  the  discount. 
There  is  simply  an  agreement,  on  the  part  of  the  borrower,  to 
continue  making  his  regular  payments,  until  his  shares  have 
reached  their  par  value,  the  whole  of  which,  he  agrees,  shall 
belong  to  the  society,  notwithstanding  the  amount  he  has,  in 
fact,  received  from  them  is  less  than  such  par  value,  by  the 
amount  he  has  allowed  the  society  by  way  of  discount,  or 
premium.  The  benefit  of  this  arrangement  the  society  reaps 
when  its  assets  become  distributable,  in  that  then  the  whole 
value  of  the  advanced  share  falls  into  the  common  fund, 
from  which  originally  was  taken  only  a  portion  of  what  that 
share  was  expected  to  be  worth.  And  it  is  the  same  tiling 
where  the  obligation  the  borrower  gives  to  the  association 
"  is  nominally  for  the  repayment  of  the  loan,  but  particularly 
for  the  payment  of  the  monthly  dues  on  the  stock  and  legal 
interest  on  the  loan,  until  the  association  is  able  to  divide,  to 
each  share  of  stock  held  by  the  members,"  l  the  par  value  of 
those  shares  as  fixed  in  the  charter.  Assuming  that  the  sum 

~ 

the  borrower  actually  received  is  covered  by  a  certain  pro- 
portion of  the  whole  number  of  dues,  payments  of  various 
kinds,  and  profits,  which  go  to  make  up  the  total  value  of  his 
matured  share ;  there  is  still  another  portion  left,  equal  to 
the  difference  between  that  value  and  what  he  really  got, 
viz.;  the  premium  he  agreed  to  pay.  Now,  the  society  appro- 
priates the  whole  according  to  the  bargain ;  and  thms  the 
premium  is  paid  at  precisely  the  same  time  at  which  the 
society  is  reimbursed  for  the  advance  made  to  its  member, 
that  is  to  say,  when  it  is  ready  to  wind  up  and  distribute  its 
assets. 

§  390.  The  premiums  cannot,  therefore,  in  any  sense  be 
said  to  be  a  prepayment  by  the  borrower,  and  the  taking  of 
such  on  the  part  of  the  society,  would  undoubtedly  be  beyond 
1  Wrigley,  Workingman's  Way  to  Wealth,  p.  67. 


§  390.]  PREMIUM.  389 

what  the  Legislature  contemplated,  and  therefore  usurious. 
Nor,  in  any  proper  sense,  can  it  be  regarded  as  an  actual 
deduction  of  money,  either  belonging  to  him,  in  the  hands  of 
the  society,  or  which  he  was  entitled  to  receive  from  it.  At 
the  time  when  he  received  the  loan,  he  had,  as  yet,  nothing 
in  the  society  but  a  prospective  interest  in  its  final  accumula- 
tions, in  proportion  to  the  number  of  his  shares.  These  are, 
to  be  sure,  estimated  at  a  certain  figure.  They  may,  how- 
ever, never  reach  it,  they  may,  indeed,  exceed  it ;  but,  for 
the  present,  there  .is  not  any  basis  for  a  deduction, — no  cer- 
tain figure  describing  an  amount  which  belonged  to  him,  or 
which  he  was  entitled  at  the  time  to  receive.  For  thereto  he 
becomes  entitled  only  by  reason  of  his  willingness  and  ability 
to  surpass  his  competitors  in  undertakings  looking  towards 
the  remission  of  future  obligations  presumptively  accumulat- 
ing in  his  favor  against  the  society.  Hence,  it  was  said  in 
Pennsylvania,  in  answer  to  the  claim  of  a  defendant  in  a 
judgment  which  had  been  given  by  him,  as  borrower,  to  a 
building  association,  and  which  embraced  the  whole  debt, 
principal,  premium  and  interest :  "  It  is  a  mistake  to  sup- 
pose, as  was  claimed  by  the  defendant,  that  he  has  paid  the 
premium.  He  only  promised  to  pay  it.  It  was  inserted  in 
the  judgment  note,  and  is  now  being  collected." ' 

1  Paxson,  J.,  in  "Watkins  v.  The  shall  be  raised  to  pay  each  unre- 
"Workiugmeu's  Building  and  Loan  deemed  shareholder  the  fixed  value 
Association,  10  W.  N.  C.  414;  38  of  his  shares  in  full."  It  is  sub- 
Leg.  Int.  333  ;  97  Pa.  St.  514.  mitted  that  this  description  is  inac- 
In  Low  Street  Building  Associa-  curate.  It  is  not  "  the  right  of  pres- 
tion  No.  6  v.  Zucker,  48  Md.  ently  receiving  the  fixed  value  of 
448,  the  transaction  is  described  the  shares,"  which  the  society  sells, 
to  be  this:  "The  association  pro-  subject  to  any  deduction  upon  that 
poses  to  sell  to  the  shareholder  value;  but  the  right  of  anticipating 
the  right  of  presently  receiving  that  fixed  value  by  receiving  what, 
the  fixed  value  of  the  shares  upon  in  the  borrower's  opinion,  may  pres- 
being  allowed  a  certain  deduc-  ently  be  equal  to  that  future  divi- 
tion  from  the  amount,  commonly  dend.  The  difference  between  these 
called  a  bonus,  it  being,  in  fact,  a  two  values,  the  premium,  he  prom- 
deduction  made  at  the  time,  and  the  ises  to  make  up  in  raising  his  share, 
shares  thus  discounted  or  redeemed  for  the  benefit  of  all  the  members 
are  to  be  paid  for  by  the  coin  inuance  of  the  society,  to  its  par  value, 
of  the  subscriptions  and  payment  of  When  that  is  accomplished,  the  so- 
weekly  dues,  and  fines,  if  any  in-  ciety  absorbs  the  whole,  and  then 
curred,  until  the  required  amount  only  is  the  premium  paid. 


390  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XIV. 

For  Purposes  of  Computation  must  be  Treated  as  a  Deduction. 

§  391.  For  the  purpose,  however,  of  computing  the  amount 
which  a  member  agreeing  to  a  certain  premium  is  entitled  to 
receive  in  cash,  it  must  be  treated  as,  theoretically,  a  deduc- 
tion. The  reason  is,  that  in  offering  its  money  to  borrowers, 
the  society  adopts,  as  the  basis  of  each  loan,  the  par  value  of 
the  shares.  Upon  this  basis  the  premium  is  bid, — so  much 
upon  each  share  advanced ;  and,  in  ascertaining  the  sum  then 
coming  to  the  applicant,  the  figure  of  the  premium  contracted 
for  is  deducted  from  the  figure  representing  the  par  value  of 
the  share, — the  difference  being  the  actual  advancement  of 
money  to  be  made.  But  it  is  apparent  that  this  is  a  rule  of 
computation  merely,  necessitated  by  the  fact  that  a  member 
is  ordinarily  entitled  to  incur  liabilities  to  the  association,  not 
exceeding,  in  the  whole,  the  par  value  of  the  shares  he  holds 
in  its  stock.  Now,  if  it  were  attempted  to  add  the  premium 
he  bids  to  the  par  value  of  such  shares,  his  debt  to  the  associ- 
ation would  clearly  be  in  excess  of  what  is  lawfully  allowable. 
In  other  words,  if  the  member  holding  five  shares  in  the  so- 
ciety, of  a  prospective  aggregate  value  of  $1000,  be,  under 
the  law  and  the  rules  of  the  society,  entitled  to  receive  a 
"  loan"  of  that  amount  and  not  beyond ;  and,  in  competing 
for  the  advance,  he  be  accepted  upon  the  offer  of  a  premium 
of  $50  per  share,  then  his  whole  debt,  or  loan,  not  being  per- 
mitted to  exceed  $1000,  it  is  evident,  that,  to  ascertain  the 
amount  he  is  entitled  to  receive,  the  sum  of  $250  must  be  de- 
ducted from  $1000.  If  it  were  added  to  $1000,  the  borrower 
actually  receiving  that  amount,  instead  of  $750,  his  debt  to 
the  society  would  be  $1250,  i.e.,  $250  in  excess  of  what  it 
lawfully  may  be.  lie  would,  therefore,  be  obliged  to  make 
up  to  the  society  such  an  amount  as  would  eventually  render 
his  shares  worth  $250  more  than  their  fixed  value,  according 
to  the  value  fixed  for  all  the  shares ;  whereas,  the  manifest 
intention  of  the  Legislature,  and  the  very  nature  and  opera- 
tion of  the  building  association  scheme,  is  to  balance,  upon 
final  settlement,  the  par  value  of  the  shares  standing  to  the 
borrower's  credit,  and  which  have  been  advanced  against  his 
indebtedness,  so  that  the  one  shall  cancel  the  other.1  This, 

1  Wrigley,  Workingman's  Way  to  Wealth,  p.  67. 


§  392.]  PREMIUM.  391 

then,  is  what  is  properly  meant  by  deducting  the  premium  in 
advance,  viz. ;  that  the  amount  of  the  cash  advanced  to  the 
member,  together  with  the  premium  bid  by  him,  shall  not  ex- 
ceed the  par  value  of  his  shares,  which  is  adopted  as  a  basis 
for  the  loans,  and  which  his  regular  contributions  are  calcu- 
lated to  make  up  in  the  course  of  the  running  of  the  build- 
ing association.  It  was,  therefore,  held  in  Maryland  that  an 
association  incorporated  uijder  an  act '  which  authorized  pre- 
miums and  interest,  or  either,  to  be  "  deducted  in  advance," 
had  no  right  to  add  a  premium  of  $250  to  a  loan  of  $1000, 
being  the  par  value  of  the  shares  advanced,  taking  a  mortgage 
for  $1250  repayable  in  monthly  instalments,  for  120  con- 
secutive months,  of  $10.41$  dues,  and  of  $6.25  for  interest 
and  bonus ;  and  that  a  contract  so  made,  not  being  in  con- 
formity with  the  statutory  requirements,  was  usurious,  and 
could  be  enforced  only  for  the  amount  actually  advanced, 
and  lawful  interest,  excluding  all  excessive  interest  exacted 
or  paid  in  the  shape  of  bonus  or  otherwise.* 

Premium  must  Ordinarily  be  a  Gross  Amount  Per  Share,  not  Merely 
Increased  Interest. 

§  392.  It  follows,  from  the  same  principle,  that  the  pre- 
mium reserved  must  ordinarily  be  a  fixed  gross  amount  per 
share  for  the  whole  advance,  and  that  the  stipulation  for  pay- 
ment of  a  bonus,  in  the  shape  of  increased  interest  merely,  is 
improper.  The  statute,  unless  it  distinctly  declares  other- 
wise, or  permits  other  methods,  means  a  definite  sum  for  the 
whole  period  of  the  loan,  and  not  anything  whatever  which 
the  parties,  in  their  contract,  may  choose  to  denominate  a 
bonus  or  premium.  A  building  association,  making  a  loan, 
stipulated  for  the  return  of  the  principal,  for  the  payment  of 
legal  interest  monthly,  in  advance,  and  for  the  payment  of  a 
bonus  of  one  per  cent.,  also  monthly  in  advance.  Upon  a 
suit  to  foreclose  the  mortgage  securing  this  loan,  the  court 
held  that,  although  one  portion  of  the  sum  to  be  paid 
monthly,  for  the  use  of  the  money,  was  called  intciv>r.  and 
another  portion  a  bonus,  yet,  in  truth  and  in  fact,  it  was  noth- 
Mi<r  more  nor  less  than  a  contract  to  pay  fifteen  per  cent,  for 

1  Act  1868,  Ch.  427.  land  Land  and  Permanent  Home- 

*  Birmingham  et  al.  v.  The  Mary-     stead  Association,  45  Md.  541. 


392  THE  LAW  OF  BUILDING   ASSOCIATIONS.      [CH.  XIV. 

such  use.  And  the  court  deliberately  say  that  the  Legislature 
"  did  not  intend  to  authorize  contracts  of  so  ruinous  a  char- 
acter as  the  one  under  consideration.  Their  design  was  to 
benefit  a  class  of  borrowers  who  might  not  be  able  to  obtain 
loans  in  other  modes.  .  .  .  Such  men  generally  understand 
the  effect  of  a  contract  for  a  loan,  at  the  legal  rate  of  interest, 
although  a  specific  sum  may  be  required  to  be  paid  for  the  ac- 
commodation, for  a  given  period  of  time.  If  the  borrower 
fails  to  pay  at  the  end  of  that  time,  his  debt  is  subject  only 
to  lawful  interest.  And  how  much  he  can  afford  to  pay  for 
that  accommodation,  is  a  matter  within  his  judgment.  But 
such  men  may  not  all  be  able  to  foresee  the  consequences  of 
a  contract  like  the  one  under  consideration,  a  contract  by 
which  the  borrower  is  bound  to  pay  fifteen  per  cent,  per  annum 
for  the  loan,  so  long  as  it  continues,  and}  from  an  accumula- 
tion of  the  debt,  at  that  rate  of  interest,  he  has  no  means 
of  extricating  himself,  except  by  the  repayment  of  the  debt, 
with  the  accumulated  interest.  This  he  may  not  at  all  times 
be  able  to  do.  Sickness,  scarcity  of  money,  misfortunes  in 
business,  and  various  other  causes,  may  prevent.  And  if  he 
has  mortgaged  his  dwelling-house  for  the  security  of  the  loan, 
he  may  find  that  the  loan,  instead  of  enabling  him  to  become 
the  proprietor  of  his  own  house,  is  sweeping  it  from  under 
him,  with  all  his  other  earnings  therein  invested.  His  con- 
dition, upon  a  failure  to  pay,  is  very  different  from  that  of  a 
man  who  has  borrowed  at  lawful  interest  and  a  stipulated 
bonus.  The  latter,  under  no  circumstances,  can  be  compelled 
to  pay,  in  addition  to  a  specific  bonus,  more  than  the  debt  and 
the  lawful  interest,  however  long  the  debt  may  remain.  Hut 
the  debt  of  the  former  may  go  on  accumulating  at  a  ratef 
which,  if  the  debt  be  a  large  one,  few  men  can  bear,  for  any 
great  length  of  time,  without  becoming  ruined."  ' 

§  393.  It  was  stated  by  Mr.  Wrigley.  in  1872,'  that  "  In 
some  associations,  organized  of  late  years,  it  is  the  rule  not  to 
deduct  the  premium  from  the  face  of  the  loan,  on  paying  the 

1  The  Mechanics  and   Working-  s  Wrigley,   Workingman's    Way 

men's  Mutual    Savings   Bank    and  to  Wealth,  p.  71.     No  attempt  is 

Building  Assoc'n  of  New  Haven  v.  made    in    that    work    to    examine 

Wilcox  et  al..  24  Conn.  147;  Same  v.  the  legal  aspect  of  such   transac- 

The  Meriden  Agency  Co.,  Ib.  159.  tions. 


§  394.]  PREMIUM.  393 

borrower  his  money,  but  to  require  him  to  pay  it  in  monthly 
instalments.  In  some  cases  it  is  a  premium  charged  on  each 
share,  and  in  others  a  percentage  on  the  amount  of  money 
borrowed."  The  same  practice  obtains  in  numerous  building 
associations  at  this  day.  All  that  can  be  said  of  it,  under  the 
authority  of  the  cases  just  examined,  proceeding,  as  they  do, 
not  only  upon  mere  statute  law,  but  equally  upon  principles 
founded  in  the  nature  of  the  building  association  scheme,  is, 
that  such  an  arrangement,  in  the  absence  of  distinct  legisla- 
tive sanction,  and  strict  compliance  with  the  requirements  of 
the  statute  authorizing  it,  is  unquestionably  illegal,  and  ren- 
ders the  entire  transaction  usurious. 

Premium  must  be  Fixed  by  Free  Competition.  Minimum  Premium. 
§  39-i.  The  premium  which  is  to  be  paid  by  any  member, 
upon  an  advancement  made  to  him  by  the  society,  must  be 
fixed  by  free  and  open  competition  between  all  the  applicants, 
and  in  no  other  way.  It  is  the  price  to  be  paid  for  obtaining 
preference  before  other  members  who  may  desire  the  same 
loan,  and  at  the  same  time  a  compensation  to  them  indirectly 
for  the  disappointment  and  postponement  which  falls  to  their 
lot.  There  can,  then,  be  only  one  proper  method  of  getting 
at  the  exact  amount,  which,  in  fairness  and  equity,  a  borrower 
should,  at  any  given  time,  be  required  to  pay,  viz. ;  by  compe- 
tition. If  no  other  person  wants  the  money,  or  if.  among 
those  who  would  take  it,  there  are  none  to  whom  the  prece- 
dence of  another  causes  any  appreciable  inconvenience,  there 
is  little  for  which  the  borrower  is  bound  to  offer  compensa- 
tion, and  the  premium  must  be  trifling,  unless  positive  injus- 
tice is  to  be  done  him.  On  the  other  hand,  if  there  are  many 
who  desire  the  advancement,  and  if  the  prospect  of  obtaining 
it  appears  to  them  worth  a  considerable  sacrifice,  then  he  to 
whom  the  loan  was  most  necessary  and  advantageous,  and  who 
has  therefore  bid  the  highest,  has  but  done  his  duty  towards 
the  other  applicants  in  agreeing  to  a  signal  concession,  and 
has  nothing  to  complain  of  if  the  premium  is  rather  oppres- 
sive. If  the  present  accommodation  was  not  worth  that  to 
him,  he  should  have  ceased  bidding,  and  preferred  his  appli- 
cation at  another  time.  Where,  on  the  other  hand,  the  soci- 
ety undertakes  to  fix  arbitrarily  a  certain  figure  as  the  lowest 


394  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XIV. 

premium  at  which  it  will  entertain  a  bid,  the  borrowing 
member,  in  case  there  are  no,  or  few,  other  applicants  for 
the  same  loan,  is  obliged  to  compensate  an  advantage  which 
he  has  not  received,  having  been  preferred  to  no  one ;  or  to 
pay  more  on  account  of  such  preference  than  those  to  whom 
he  was  preferred  considered  it  worth.  The  impropriety  of 
such  an  arrangement  is,  therefore,  apparent,  even  independ- 
ently of  any  statutory  considerations ;  and  whatever  grounds 
these  are  based  upon  are  equally  applicable,  on  principle,  to 
all  cases. 

§  395.  In  Pennsylvania,  under  the  Act  of  1859,  which 
directs  building  associations  to  put  up  their  money  for  com- 
petition among  the  members,  and  to  lend  it  to  the  highest 
bidder,  upon  his  furnishing  proper  security,  Sharswood,  C.  J., 
makes  the  following  observations  on  the  subject  of  fixed  pre- 
miums established  by  by-law  in  these  societies :  "  They  are 
bound  to  offer  all  that  is  in  the  treasury  to  open  competition, 
so  that  the  members  may  obtain  the  loan  at  a  low  premium, 
if  there  should  be  no  bid  at  a  higher.  The  practical  opera- 
tion of  such  institutions  is,  that  whenever  the  member  pro- 
cures a  loan,  at  a  premium  below  the  average  of  the  premiums 
for  the  whole  time  the  association  has  to  make,  he  is  to  that 
extent  a  gainer ;  when  his  loan  is  at  a  premium  higher  than 
the  average,  he  is  to  that  extent  a  loser.  This  is  a  most  valu- 
able feature  in  such  associations,  and  hence  the  importance 
of  maintaining  the  principle  of  free  competition  in  the  bids. 
"When  the  member  is  told  that  there  is  a  minimum  premium 
below  which  loans  will  not  be  made,  he  must  offer  that 
amount  for  the  loan,  whether  any  other  one  offers  or  not.  If 
no  offer  to  that  amount  is  made,  the  money  remains  in  the 
treasury  without  investment.  It  is  evident,  in  this  way,  that 
the  members  who  are  not  borrowers  will  obtain  a  very  undue 
advantage  over  the  members  who  are  borrowers.  These  in- 
stitutions are  liable,  like  everything  else  human,  to  abuse,  and 
we  are  bound  to  guard  them  carefully  from  being  perverted 
into  mere  contrivances  by  which  capitalists  can  evade  the  laws 
of  usury.  So  the  Legislature  evidently  intended  they  should 
be  by  the  Act."  '  Hence  a  provision  in  the  rules  of  the  so- 

»  Stiles's  App.,  9  W.  N.  C.  83. 


§  397.]  PREMIUM.  395 

ciety  providing  for  a  minimum  premium  is  held  inconsistent 
with  the  Act,  and  void.1 

§  396.  Nor  does  the  power  of  regulation  of  the  society's 
business,  residing  in  the  directors,  entitle  them  to  adopt  any 
rule  as  to  a  minimum  premium,  or  in  any  manner  abridge  the 
right  of  a  member  to  receive  the  desired  loan  at  no  greater 
expense  than  that  which  the  unfettered  competition  among 
the  applicants,  in  the  course  of  which  the  borrower's  bid  was 
made,  imposes  upon  him.  Upon  this  subject,  Gilmore,  C.  J., 
says  :*  "  The  most  valuable  right  that  a  member  acquires  by 
virtue  of  his  membership  is  that  of  obtaining  a  loan  of  money 
with  which  to  procure  a  home,  with  the  privilege  of  repaying 
the  same  in  weekly  instalments.  This  right  .  .  .  cannot  be 
destroyed  or  abridged  by  the  Board  of  Directors,  under  the 
power  of  regulation"  that  may  be  given  them  as  to  prescrib- 
ing rules  touching  the  time,  manner  and  place  of  exercising 
the  right  of  demanding  loans,  the  kind  of  security  to  be  fur- 
nished, and  the  formalities  of  its  execution  and  tender  for  ap- 
proval. "  That  this  kind  of  regulation  does  not  authorize  the 
Board  of  Directors  to  regulate  the  amount  of  premium  to  be 
paid  by  a  member  for  a  loan,  or  to  refuse  loans  to  members 
otherwise  entitled  to  them,  except  upon  payment  of  the  min- 
imum premiums,  fixed  by  the  directors,"  also  appeared  from 
a  section  of  the  articles  providing  that  "  money  on  hand  to 
be  loaned  shall  be  sold  to  the  member  (or  depositor)  who 
will  pay  the  highest  premium  for  the  preference  in  taking  the 
loan.  This  is  the  only  mode  known  to  the  law  by  which  the 
premium  upon  loans  can  be  fixed  and  determined.  .  .  . 
When  there  is  little  or  no  competition,  and  a  member  bids  a 
merely  nominal  premium  for  the  preference,  and  there  is  no 
higher  bid  by  any  other  member  or  depositor,  he  is  entitled 
to  the  loan  at  such  nominal  premium,  and  the  Board  of  Di- 
rectors cannot  refuse  it  if  sufficient  security  is  properly  ten- 
dered." The  fixing  of  a  minimum  premium  was,  therefore, 
in  this  case  also  held  illegal.' 

§  397.  It  follows,  as  a  necessary  consequence  of  the  ille- 
gality of  the  attempt  to  establish  and  enforce  any  provision  as 

1  Stiles's  App.,  9  W.  N.  C.  83.          8.  P.,  State  t>.  Oberlin  Building  and 
9  State*.  Gnseuville  Building  As-     Loan  Association,  35  Ohio  St.  258. 
sociution,  29  Ohio  St.  92.     See  also,         *  See  cases  in  above  note. 


396  THE   LAW  OF  BUILDING   ASSOCIATIONS.       [CH.   XIV. 

to  a  fixed  minimum  pri-mium,  that  contracts  made  under  the 
stress  of  the  operation  of  such  a  rule,  and  affected  by  it  to  the 
prejudice  of  the  borrower,  are  usurious,  and  cannot  be  en- 
forced according  to  their  terms.1  But  the  mere  existence  of 
the  rule  in  the  society  will  not  afford  the  borrower  a  defence 
against  the  enforcement  of  his  covenant,  unless  he  was  really 
affected  by  its  operation.  If,  therefore,  the  premium  which 
he  contracted  to  pay  was  the  result  of  fair  competition  running 
it  up  without  reference  to  the  illegal  law,  no  bid  being  re- 
fused because  below  the  established  minimum,  nor  raised  for 
the  sole  purpose  of  covering  it,  he  has  nothing  to  complain 
of,  and  cannot  evade  his  obligation  by  showing  the  presence  of 
a  rule  which  would  carry  an  unlawful  taint  to  any  contract 
affected  by  it,  but  which  was  no  element  in  his.* 

Interest  Upon  Premium. 

§  398.  The  nature  of  the  premium,  being  neither  a  deduc- 
tion nor  a  prepayment,  forbids  the  charging  of  interest  upon 
it,  unless  expressly  permitted  by  statute.  If  it  were  a  deduc- 
tion, it  would  be  analogous  to  the  bonus  reserved  in  advance 
by  usurers  upon  loans  made  by  them,  ostensibly  at  legal  inter- 
est, the  debtor  being,  nevertheless,  required  to  pay  that 
interest  upon  the  whole  nominal  sum,  as  if  he  had  received  it 
entire ;  thus  virtually  paying  interest  upon  the  bonus.  If  it 
were  intended  to  be  a  prepayment,  the  borrower,  since  he 
does  not,  in  fact,  hand  it  over  immediately,  ought  to  pay  in- 
terest upon  it  to  the  society  as  for  the  forbearance  of  a  debt 
presently  due.  In  either  case,  the  legality  of  the  premium 
would  seem  to  draw  after  it  the  legality  of  interest  upon  the 
premium.  Such,  however,  is  not  the  character  or  office  of  the 
premium.3  It  is  simply  the  amount  which  the  member,  in 
consideration  of  immediate  payment,  declares  himself  willing 
to  relinquish  to  the  society  upon  the  credit  coining  to  him  at 
the  final  distribution, — the  period  to  which  alone  the  whole 
arrangement  has  reference.  It  is  manifest  that  the  claim  of 
interest  upon  premiums,  so  understood,  constitutes  a  paradox 
for  which  there  can  be  no  apology  except  that  of  positive 
legislative  grant.  In  Ohio,  the  court  says :  "  The  statute 

1  Stiles's  App.,  ubisvpra.  Young,  9  W.  N.  C.  (Pa.)  261  (El- 

*  Orangeville     Mutual      Saving     well,  P.  J.,  Com.  Pleas). 
Fund    and    Loan    Association    t>.         3  See  ante,  §§  389-390. 


§  399.]  PKEMIUM.  397 

does  not  authorize  the  exaction  of  interest  on  the  premium. 
The  extent  of  the  plaintiffs  demand,  exclusive  of  fines,  is  to 
require  the  payment  of  the  stated  dues  and  interest  on  the 
money  advanced,  until  the  time  arrives  for  winding  up  the 
affairs  of  the  association.  The  premium  is  then  to  be  ac- 
counted for  by  the  borrower  as  so  much  advanced  towards  the 
redemption  or  payment  of  his  stock.  Interest  is  intended  by 
the  statute  as  a  compensation  for  the  use  of  the  money  the 
borrower  receives.  The  higher  the  premium,  the  less  money 
the  borrower  gets,  and,  if  interest  can  also  be  charged  on  the 
premium,  the  less  money  he  has  to  use,  the  higher  the  rate  of 
interest  he  will  have  to  pay  for  it.  A  declared  object  of  the 
statute,  as  expressed  in  its  title,  in  authorizing  these  associa- 
tions, is  to  enable  their  members  to  obtain  for  themselves 
homesteads.  To  justify  an  exaction  so  well  calculated  in  its 
practical  results  to  defeat  this  object,  as  this  exorbitant  demand 
for  interest,  the  authority  for  it  ought  to  be  unequivocally  ex- 
pressed." '  It  has  also  been  expressly  held  unlawful  and 
essentially  usurious  in  Maryland,"  and  Iowa,*  as  well  as  in 
Kentucky 4  and  Tennessee,6  and  must  be  so  regarded  except 
where  distinct  legislative  ratification  will  avail  to  legalize  it,  as 
in  Pennsylvania.6 

Abatements,  Discounts,  and  Remissions  on  Premium. 

§  399.  It  is,  of  course,  within  the  discretion  of  the  build- 
ing association,  to  allow  abatements,  discounts,  or  remissions 
upon  the  premium  bid  by  any  applicant  for  a  loan  under  cer- 

1  Forest  City  United  Land  and  4  Gordon,     etc.,     v.    Winchester 

Building  Association  t>.  Gallagher  et  Building  and  Accumulating  Fund 

al.,  25  Ohio  St.  208.  Association,  12  Bush,  110;  Herbert, 

*  The       Baltimore       Permanent  etc.,  v.  The  Kenton  Building  and 

Building  and  Land  Society  v.  Tay-  Saving  Association   of  Coviugton, 

lor,  41  Md.  409.     See  also,  Oak  Cot-  11  Id.  296. 

tage  Building  Association  v.  East-  '  Martin  v.  The  Nashville  Build- 
man  and  Rodgers,  31  Md.  561 ;  Wil-  ing  Association,  2  Cold.  418. 
liar  v.  The  Butchers'  Loan  and*  An-  «  See  Acts,  12  April,  1859;  29 
nuity  Ass'n,  45 Id.  546;  Birmingham  April,  1874;  7  June,  1879;  [Building] 
et  al.  v.  The  Maryland  Land  and  Per-  Association  v.  Neurath,  2  W.  N.  C. 
manent  Homestead  Ass'n. 45  Id.  541.  95;  Building  Association  v.  George, 

8  Hawkeye  Benefit  &  Loan  Assoc'n  3  Id.  239;  Seldcn   v.  The  Reliable 

r.  Blackburn,  48  Iowa,  885;   Bur-  Savings  and  Building  Association, 

lington  Mutual  Loan  Association  v.  32  P.  F.  Smith,  336. 
Heider  et  al.,  55  Id.  424. 


398  THE   LAW   OF   BUILDING    ASSOCIATIONS.      [CH.  XIV. 

tain  specified  circumstances.  Such,  indeed,  is  the  custom  in 
many  societies,  at  least  in  Pennsylvania,  "  Where  a  member 
has  simply  paid  dues  on  a  certain  series  of  stock,  without  bor- 
rowing, for  one  or  more  years,  and  then  borrows,  an  allowance 
of  ten  per  cent,  is  made  upon  the  premium  bid  (the  rate,  it  is 
believed,  most  usual)  for  each  year  that  has  expired  since  the 
series  of  stock  on  which  he  borrows  was  issued.  For  instance, 
were  he  to  borrow  on  a  series  of  stock  at  any  time  during  the 
running  of  the  second  year  of  its  existence,  say  at  thirty  per 
cent.,  he  would  be  allowed  a  deduction  at  ten  per  cent,  off  the 
premium,  thus  reducing  the  premium  to  twenty-seven  per 
cent.  If  the  stock  is  in  its  third  year,  twenty  per  cent,  will 
be  deducted,  reducing  the  premium  to  twenty-four  per  cent. 
If  it  is  in  its  sixth  year,  five-tenths,  or  fifty  per  cent,  will  be 
deducted,  reducing  the  premium  to  fifteen  per  cent.  This  is 
manifestly  a  just  and  reasonable  provision,  as  it  would  be  un- 
fair to  charge  one  as  much  premium  for  the  use  of  money 
borrowed  in  the  second,  third  or  fifth  year  of  a  series,  as  is 
charged  one  borrowing  during  the  first  year,  and  who  would 
then  have  the  use  of  the  money  during  the  entire  running  of 
the  series."  '  It  has  already  been  seen  that  it  is  lawful  for  a 
building  association  to  compromise  with  a  borrowing  mem 
ber,"  and  that,  at  all  events,  when  the  compromise  has  taken 
effect,  the  society  is  not  in  a  position  to  dispute  the  validity 
of  the  arrangement  under  which  it  was  done.* 

§  400.  Upon  repayment  of  the  loan,  previously  to  its 
maturity,  such  remissions,  or  discounts,  may  become  obligatory 
upon  the  association,  under  the  statutes  or  under  the  provi- 
sions of  its  own  by-laws.  These  cases  occur,  (1)  upon  voluntary 
repayment  ;4  (2)  when  the  mortgage  becomes  divested  and 
repayable  by  operation  of  law  upon  a  judicial  sale  of  the 
property  mortgaged  after  the  borrower's  decease  ;6  (3)  where, 
upon  collection  of  the  member's  debt  by  legal  process,  a  great- 
er sum  being  realized  than  the  amount  actually  advanced  to  the 
member,  and  a  reloan,  at  a  premium,  is  made  of  the  money 
collected,  the  society  is  required  to  return  to  the  first  borrow- 
er one  of  the  two  premiums  realized  upon  the  same  money.' 

1  Wrigley,    Workingman's  Way        4  See  ante,  §§  154-l{f7. 
to  Wealth,  pp.  73-74.  •  See  ante,  §  174. 

*  See  ante,  g§  170,  323.  •  See  ante,  §  384. 

»  See  ante,  §§  16»-170. 


§  401.]  FINES.  399 


CHAPTER  XV. 

FINES. 

§  401.  Purpose  of  fines  in  building  associations. 

£  402.  Legal  aspect  of  fines  in  building  associations. 

§  404.  Submission  to  fines  an  essential  part  of  building  association 
loans.  Married  women,  etc. 

§  405.  Power  to  impose  fines  depends  upon  authority  conferred  by 
statute  and  charter. 

§  406.  Regulation  of  fines  belongs  to  by-law.     Rules  to  be  observed. 

§  407.  Fines  must  be  notorious,  certain,  and  fixed  by  by-law.  Con- 
struction of  ambiguous  provisions  favors  member. 

§  410.  Fines  must  be  reasonable.     Fines  upon  fines,  or  in  progression. 

§  413.  Proper  measure  of  fines. 

§  414.  Fines  must  be  imposed  for  dereliction  in  duties  incident  to  mem- 
bership. Depositors. 

§  415.  Fines  upon  interest. 

§  417.  Interest  upon  fines. 

§  418.  Discretion  of  directors  in  remitting  fines. 

Purpose  of  Fines  in  Building  Associations. 

§  401.  Fines  are  essentially  an  incident  to  membership  in 
building  associations,1  the  direct  outgrowth  of  the  obligation, 
resting  upon  every  shareholder,  regularly  and  punctually  to 
pay  the  dues  accruing  periodically  upon  his  stock.2  The  un- 
interrupted and  certain  influx  of  these  small  payments  is  the 
primary  condition  in  order  to  the  success  of  the  entire  enter- 
prise. A  member  neglecting,  in  this  particular,  the  perform- 
ance of  his  duty,  which  the  society  has  a  right  to  calculate 
upon,  disturbs,  to  the  extent  of  his  default,  the  course  of  its 
business,  and  injures  every  individual  stockholder  to  the 
amount  of  his  proportionate  share  of  the  profit  which  might 
be  derived  from  the  investment  of  the  money  if  properly 
paid.  Exactly  how  great  this  injury  may  be,  it  is  impossible 
to  estimate  with  accuracy ;  but  it  is  sufficient  to  warrant  the 
association  in  making  such  provision  as  will,  on  the  one  hand, 
reimburse  it  for  any  losses  resulting  from  the  member's 

1  See  ante,  §  92.  cash  in  payment  thereof.     People's 

*  Dues  and  fines  are  payable  in  Building   &   Loan    Association   «. 

cash,    and    the    treasurer   has    no  Wroth  et  al.,  14  Vr.  (N.J.)  70.    And 

right,  and  cannot  be  authorized  by  see  ante,  §§  200,  217. 
the  officers,  to  receive  anything  but 


400  THE  LAW  OP   BUILDING   ASSOCIATIONS.        [CH.  XV. 

negligence ;  and,  on  the  other  hand,  prevent  him  from  taking 
advantage  of  his  fellows  by  reaping  the  benefit  of  their 
promptitude,  without  either  bearing  an  equal  burden,  or 
indemnifying  the  society  for  his  delay.  This  is  accomplished 
through  a  system  of  fines,  which  are  not,  therefore,  to  be 
regarded  as  penalties  and  forfeitures,  abhorred  by  the  law, 
but  as  liquidated  damages  for  a  breach  of  the  member's 
original  contract,  wherefore,  ex  aequo  et  bono,  the  society  is 
entitled  to  be  made  whole.1 

Legal  Aspect  of  Fines  in  Building  Associations. 

§  402.  It  is  upon  this  understanding  of  the  nature  of  fines 
in  building  associations,  that  they  will  be  aided  by  the  courts 
in  recovering  them ;  for  the  law  will  not  enforce  fines,  as 
such,  because  it  is  a  settled  rule,  that  penalties  agreed  upon 
for  a  breach  of  contract  are  illegal.11  It  is,  indeed,  said  by 
the  court,  in  one  case  :s  "  We  perceive  nothing  in  the  char- 
acter of  these  associations,  to  relieve  them  from  the  doctrine 
of  equity  we  apply  to  other  cases  of  penalty  for  the  nonpay- 
ment of  money,  which  is  to  prohibit  its  enforcement  upon 
condition  that  the  primary  debt  be  paid  with  interest."  The 
dues  compose  the  debt,  "  which,  by  fair  contract,  the  member 
agrees  to  pay,  at  stated  times,  into  the  treasury  of  the  society. 
If  he  pay  them,  the  debt  is  paid,  and  it  is  satisfied."  "  It  is 
true,  indeed,  that  these  fines,  which  are  provided  for  in  the 
articles  of  building  associations,  have  been  fruitful  sources  of 
profit,  and  that  the  members  of  the  association  who  remain 
such  to  the  end  will  share  in  the  profits.  But  that  is  not  an 
answer  which  will  satisfy  the  oppressed  member  at  the  time, 
or  lighten  the  load  he  is  called  upon  to  bear.  If  all  the 
members  owned  the  like  number  of  shares,  and  all  obtained 
the  same  amount  of  advances,  and  all  were  to  make  default 
together,  and  then  pay  their  several  fines  simultaneously,  the 
prosperity  of  such  association  by  these  means  would  bring  it 

1  Shannons.  The  Howard  Mutual  between  such  prn.iiiirs  and  fines  in 

Building  Association  of  the  City  of  building  associations  is  pointed  out, 

Baltimore,  36  Md.  383.  see  post,  §  403 

s  Ocmulgee  Building  and  Loan  *  Mulloy  ».  Fifth  Ward  Building 

Association  t>.  Thomson,  52  Ga.  Association,  2  McArth.  (Supr.  Ct., 

427,  where,  however,  the  difference  D.  C.)  594;  Olin,  J.,  digs. 


I  403.]  FINES.  401 

speedily  to  a  winding  up  and  a  common  division  of  the  profits, 
when  each  man  would  find  his  penalties  returned  to  him, 
slightly  diminished,  perhaps,  by  expenses.  But  these  circum- 
stances are  not  likely  to  occur  in  the  history  of  any  of  these 
societies.  The  shares  held  by  the  members  respectively  are 
unequal;  some  of  the  members  obtain  advances,  others  do 
not.  Some,  through  misfortune  in  business,  or  sickness,  or 
other  causes,  are  unable  to  make  their  monthly  payments ; 
and  so  it  happens  that,  at  the  winding  up,  those  members 
who  have  asked  for  no  advances,  met  with  no  misfortunes, 
and  have  incurred  no  penalties,  gather  most  of  the  profits 
collected  from  their  less  fortunate  brethren.  The  advantages 
are  for  the  strong ;  the  losses  fall  upon  the  weak.  This,  how- 
ever, is  only  the  experience  of  mankind  in  every  department 
of  life.  But  it  often  becomes  the  duty  of  the  court  to  check 
the  power  of  the  former,  and  to  protect  the  latter  even  from 
the  consequences  of  their  own  voluntary  contracts.'"  Such, 
however,  is  not  the  view  taken  by  the  vast  majority  of  judi- 
cial opinions  upon  this  subject. 

§  403.  It  is  said  in  England,  that,  when  a  fine  is  imposed 
by  the  rules  upon  any  borrowing  member  who  becomes  in 
arrear  with  his  subscriptions,  this  is  not  interest  in  the  way  of 
a  penalty  so  as  to  entitle  the  member  to  equitable  relief;*  and 
in  Maryland,  fines  in  building  associations  are  not  held,  in  any 
sense,  to  come  within  the  principle  which  forbids  a  court  of 
equity  to  lend  itself  to  enforcing  the  payment  of  fines,  penal- 
ties and  forfeitures.8  The  same  view  is  taken  in  Georgia, 
where  they  are  treated,  when  reasonably  assessed,  as  liqui- 
dated damages.4 

1  In  this  case,  fines  for  default  in  the  association  was  incorporated  or 

the  payment  of  monthly  dues  had  not. 

been  imposed  at  the  rate  of  ten  per  s  Parker  v.  Butcher,  36  L.  J..  Ch. 

cent,  per  month,  and  the  court  held  552;  Law  Rep.,   3  Eq.  762.     See 

that  chancery  would  interpose  to  also  Thompson  ®.    Hudson,    Law 

prohibit  the  collection  of  these  pen-  Rep.,  2  Ch.  App.  255;  Matterson  r. 

alties,  and  would  restrain  a  sale  of  Elderfield,  Law  Rep.,  4  Ch.  App. 

real  estate  by  virtue  of  a  deed  of  207;  20  L.  T.  Rep.,  N.  8.  503;  17 

trust  given  to  secure  the  amount  ad-  W.  R.  442;  33  J.  P.  326. 

vanced,  when  the  account  between  3  Shannon    t>.    Howard    Mutual 

the  parties  disclosed  that  nothing  B'ld'g  Ass'n  of  Baltimore, 36  Md.888. 

was  owing  the  society  except  fines.  *  Ocmulgee  Building  and   Loan 

It  does  not  appear,  however,  whether  Ass'n  t>.  Thomson,  52  Ga.  427. 


402  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  XV. 

Submission  to  Fines  an  Essential  Part  of  Building  Association  Loans. 

§404.  Indeed,  so  thoroughly  is  the  propriety  of  these  charges 
recognized,  that  in  Pennsylvania,  where,  under  the  act  of  1859, 
a  married  woman's  mortgage  of  her  separate  estate  to  a  building 
association  for  her  own  debt,  could  bind  her  property  only  to 
the  extent  of  the  amount  actually  advanced  with  interest,1  her 
mortgage  to  secure  her  husband's  loan,  which,  as  a  stockholder, 
he  obtained  from  the  society,  covers  and  stands  for  fines  in- 
curred by  him  by  reason  of  his  default  in  payment  to  the  asso- 
ciation.8 And  in  Maryland,  it  is  said,  that,  where  a  mortgage 
given  to  a  building  association  by  one  of  its  members  recog- 
nizes the  obligation  of  fines  which  may  be  imposed  upon  him 
by  the  society,  and  stipulates  for  their  payment,  the  court, 
when  called  upon  to  foreclose  the  mortgage,  ex  parte,  or  other- 
wise, ought  to  allow,  in  the  ascertainment  of  the  indebtedness 
of  the  mortgagor,  such  reasonable  and  legal  fines  as  may  have 
been  incurred  by  him,  by  his  own  consent,  since  he  acknowl- 
edges himself  bound  by  the  laws  and  regulations  of  the  build- 
ing association  authorized  by  its  charter,  when  he  has  been  in 
default.*  But  it  is  also  said  that  a  covenant  to  pay  "  all  fines 
imposed  by  the  articles  of  association,"  does  not  make  the 
articles  a  part  of  the  mortgage,  or  authorize  the  court  to  con- 
sider them  in  construing  it.4  On  the  other  hand,  it  is  said  in 
New  Jersey,  that,  even  where  the  mortgage  makes  no  men- 
tion whatever  of  fines,  or  of  the  borrower's  liability  to  pay 
such,  the  borrower,  having  paid  them,  can  claim  no  credit  for 
them  upon  his  mortgage  debt.*  "  Neither  the  condition  of  the 
bond,  nor  the  terms  of  the  mortgage,  contain  any  provision 

1  Wolbach  v.  The  Lehigh  Building  It  is  there  said  that,  in  case  of  sale, 

Assoc.,  3  Norris  (84  Pa.  St.,)  211.  the  court  cannot  look  beyond  the 

*  Juniata  Building  and  Loan  As-  mortgage  itself  in  ascertaining  the 

sociation  «.  Mixell,  84  Pa.  St.  313.  sum  due,  where  the  rules  and  ar- 

See  also  Massey  v.   The  Citizens'  tides  of  the  building  association  are 

Building  and  Savings  Association,  not  so  referred  to  as  to  make  them 

22  Kas.  624  ;  Relief  Saving  Fund  a  part  of  the  mortgage,  or  call  the 

Association  v.  Longshore  et  al.,  8  court's    attention    to    them.      But 

Luz.  Leg.  Reg.  (Pa.)  199.  see    McCahan    t>.  The    Columbian 

5  Shannon  v.  The  Howard  Mutual  Building  Association  of  East  Balti- 

Building  Association  of  the  City  of  more,  40  Md.  226. 

Baltimore,  36  Md.  383.  6  Clarkville  Building  and  Loan 

4  Pobertson     «.    The    American  Association  r.   Stephens,  11  C.  E. 

Homestead  Association,  10  Md.  397.  Gr.  (N.  J.)  351. 


§  406.]  FINES.  403 

for  the  collection  of  these  fines.  The  complainants  (building 
association)  do  not  claim  they  can  be  enforced  against  the 
mortgaged  premises  as  part  of  the  sum  to  be  raised  by  a  sale. 
The  contention  of  the  defendant  is,  that  .  .  .  there  never  were 
any  fines  for  want  of  power  to  impose  them,  and  the  money 
taken  in  payment  of  them  still  belongs  to  the  defendants,  and 
must  now  be  applied  by  the  court  in  discharge  of  the  mort- 
gage debt."  The  court,  after  repelling  this  assumption,  on  the 
ground  that  there  was  no  usury  in  the  transaction,  directs  the 
master  to  "  apply  each  monthly  payment,  first  in  payment  of 
the  fines  of  that  month,  then  to  the  monthly  instalments  on 
subscriptions  to  stock,  and  the  balance  to  the  monthly  in- 
terest." 

Power  to  Impose  Fines  Depends  upon  Authority  Conferred  by  Statute 
and  Charter. 

§  405.  As  all  the  powers  of  building  associations  are  meas- 
ured by  the  terms  of  their  charters,  and  of  the  statutes  under 
which  the  incorporation  is  effected,  it  follows,  that  no  society, 
calling  itself  a  building  association,  is  to  be  permitted  to  chargb 
fines,  except  by  authority  of  charter,  derived  from  statutory 
enactment  authorizing  their  imposition.  Where  this  is  want- 
ing, fines  cannot  be  enforced,  and,  if  paid  by  a  borrower, 
must  be  defalked  from  the  amount  due  by  him  to  the  asso- 
ciation.1 

Regulation  of  Fines  Belongs  to  By-Law.    Rules  to  be  Observed. 

§  406.  Under  the  statute  and  charter,  the  regulation  of  the 
fines  is  left  to,  and  becomes  the  proper  province  of,  the  by- 
laws. But,  even  without  any  distinct  statutory  qualifications, 
the  power  is  subject  to  well-settled  restrictions.  These  are 
principally,  (1)  that  the  fines  to  be  charged  must  be  certain 
and  notoriously  established  by  by-law ;  (2)  that  they  must  be 
reasonable,  and  not  grossly  oppressive ;  (3)  that,  in  general, 
they  must  be  fines  imposed  for  the  neglect  of  duties  which 
the  member  owes  as  a  corporator. 

1  Lincoln  Building  and  Savings  vania.     See  Jarrett  t>.  Cope,  68  Pa. 

Association,   appellee,    v.  Graham,  St.  67;    Rhonds   ».   Hoerneretown 

appellant,  7  Neb.  173;  Same  v.  Ben-  Building  Association,  83  Id.   180; 

jamin  and  Benjamin,  Ib.  181.    The  Link  v.  Germantown  Building  Asso- 

samc  doctrine  was  held  in  Peuusyl-  ciation,  89  Id.  15. 


404  THE  LAW   OF   BUILDING    ASSOCIATIONS.        [CH.  XV. 

Fines  must  be  Notorious,  Certain,  and  Fixed  by  By-Law.     Construc- 
tion of  Ambiguous  Provisions  Favors  Member. 

§  407.  It  is  necessary  that  every  member  should  be  aware, 
in  advance,  of  the  consequences  of  any  action  or  omission  in 
violation  of  the  rules  of  the  society.  These  rules  or  by-laws 
should,  therefore,  be  explicit  and  unequivocal  upon  the  sub- 
ject. "The  rules  imposing  fines  should  be  very  precise  in 
their  terms,  and  clear  in  their  meaning,  as  the  courts  do  not 
like  penalties  of  any  kind,  and  generally  decide  against  them 
if  possible." '  Fines  cannot  be  collected  at  all  unless  they  are 
imposed  by  charter  or  by-law,2  and  if  the  by-law  imposing 
them,  by  reason  of  ambiguousness,  admit  of  several  interpre- 
tations, the  courts  will  adopt  that  most  favorable  to  the  mem- 
ber and  least  favorable  to  the  association. 

§  408.  So,  where  the  rule  was,  that  "  mortgagors  neglect- 
ing to  pay  their  monthly  repayments  will  be  subject  to  fines 
at  the  rate  of  three  per  cent,  per  share  for  the  first  month, 
and  for  each  and  every  succeeding  month  threepence  per 
share  additional  on  such  repayments,"  the  association  was 
allowed  to  collect  only  one  fine  of  threepence  on  each  share 
of  the  defaulting  member.  This  was,  indeed,  less  than  the 
member  himself  had  contended  for.  The  society  claimed 
threepence  per  share  for  the  first  month,  sixpence  for  the 
second,  ninepence  for  the  third,  and  so  on,  adding  three- 
pence for  each  month.  It  was  contended  against  this  claim, 
that,  if  the  society  were  allowed  under  the  rule  to  put  on 
cumulative  fines  in  arithmetical  progression,  it  would  work  a 
forfeiture,  and  that  no  court  of  equity  would  put  a  construc- 
tion on  an  ambiguous  rule  which  would  amount  to  a  forfeiture 
of  a  man's  estate;  and  it  was  suggested  that  the  most  that 
could  be  charged  under  the  rule  was  sixpence  per  share  for 
each  month's  default  after  the  first ; — that  was,  sixpence  for 
the  second,  sixpence  for  the  third,  and  so  on.  But  the  court 
(Flanagan,  J.)  said  : — "  "What  is  the  true  construction  of  the 
rule  ?  I  confess  that  I  have  felt  considerable  difficulty  in  put- 
ting a  construction  upon  it.  The  society  consists  of  members 
and  borrowers,  and  the  latter  may  be  third  parties.  The  bor- 
rowed money  ought  to  be  repaid  by  monthly  instalments — so 

1  Davis,  Law  of  Building,  etc.,         *  Building  Association   «.  Scbul- 
Societies,  p.  32.  ler,  3  W.  N.  C.  (Pa.)  431. 


§  409.]  FINES.  405 

much  for  principal,  and  so  much  for  interest.  The  owner  of 
the  estate,  after  some  months,  ceased  to  pay  the  instalment, 
and  then  the  society  put  their  rule  in  force.  They  construed 
this  to  mean  that  they  might  multiply  these  fines  in  arithmeti- 
cal progression  month  after  month,  and  then  add  them  all  to- 
gether. It  is  enough  to  say,  that  after  about  twenty  months 
the  fines  amounted  each  month  to  nearly  as  much  as  the  in- 
stalments, and  if  the  rule  had  not  been  changed,  would  have 
largely  exceeded  the  instalment  itself.  ...  I  think  that  the 
rule  admits  of  three  constructions, — the  one  contended  for  by 
the  society,  the  other  suggested  in  the  argument  for  the  bor- 
rower, and  a  third,  more  favorable  for  him,  which  I  think  the 
right  construction,  and  that  is,  that  the  society  are  only  to  be 
allowed  one  fine  of  threepence  on  each  share."  * 

§  409.  So,  too,  under  a  by-law  providing  that  "if  any 
stockholder  shall  neglect  or  refuse  to  pay  his  weekly  dues  as 
often  as  the  same  shall  be  payable  .  .  .  every  stockholder 
so  neglecting  or  refusing  shall  forfeit  and  pay  the  additional 
sum  of  ten  cents  for  every  share  by  him  held  for  every  such 
weekly  neglect  or  refusal,  to  be  charged  with  the  weekly 
dues," — it  was  held  that  one  fine  only  could  be  charged  on  any 
number  of  omissions  to  pay  one  particular  installment.*  And 
under  a  by-law  providing,  that  "  if  any  person  shall  neglect, 
omit,  or  refuse  to  pay  his  or  her  weekly  dues  at  the  time  re- 
quired hereby,  he  or  she,  as  the  case  may  be,  shall  be  fined 
ten  cents  weekly,  for  each  and  every  dollar,  remaining  un- 
paid ;" — it  was  held  that  only  one  fine  could  be  imposed  for  the 
nonpayment  of  the  weekly  installment  as  it  fell  due,  and  not 
repeated  fines  for  every  week  that  it  may  have  been  allowed 
to  stand  in  arrear.3  Where  it  was  provided,  that,  "  whenever 
and  so  often  as,  the  borrower  should  make  default  in  the  pay- 
ment of  any  of  the  said  monthly  instalments,"  he  should 
"  pay  to  the  society  Vs.  in  the  pound  for  each  and  every  pound 
of  said  instalment  so  left  unpaid,"  and  the  society  claimed 
not  only  Is.  in  the  pound  for  the  month  in  which  default  was 

1  In  re  Tierney,  9  Ir.  Rep.,  Eq.  3  The  Monumental  Permanent 

1;  8  Ir.  L.  T.  Rep.  29.  Building  and  Land  Society  of  Bal- 

*  Shannon  ».  The  Howard  Mu-  timore  v.  Lewiu,  38  Md.  445.  See 

tual  Building  Association  of  the  similarly,  Building  Association  t>. 

City  of  Baltimore,  36  Md.  383.  Schuller,  3  W.  N.  C-  (Pa.)  431. 


406  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [CH.  XV, 

made,  but  for  all  subsequent  months  during  which  it  remained 
unpaid,  and  also  Is.  in  the  pound  for  every  fractional  part  of 
a  pound ;  it  was  held  that  they  were  entitled  only  to  Is.  in 
the  pound  for  the  month  in  which  default  was  made,  and  that 
they  could  take  nothing  on  the  fraction  of  a  pound.'  Simi- 
larly, where  the  table  of  fines  exhibited  in  the  rules  was 
arranged  in  such  order  from  the  first  to  the  sixth  month  as  to 
make  lines  progressive  from  month  to  month,  but  there  was 
no  express  charge  for  the  seventh  and  subsequent  months ; 
the  court  held  that,  according  to  the  true  construction  of  the 
table,  the  fines  were  not  to  increase  in  amount  after  the  sixth 
month.9 

Fines  must  be  Reasonable.    Fines  upon  Fines,  or  in  Progression. 

§  410.  In  Ohio,  Sec.  2  of  the  Act  of  9  May,  1868,  author- 
izes the  levying,  assessing  and  collecting  from  the  members 
"  such  sums  of  money,  by  rate  of  stated  dues,  fines,  .  .  . 
as  the  corporation  by  its  laws  may  adopt."  There  is  here  no 
limitation  as  to  amount  or  occasion  of  the  imposition  of  the 
fines  upon  members,  except  as  prescribed  in  the  by-laws 
adopted  by  the  corporation,  and  there  is  no  express  limitation 
on  the  power  of  the  corporation  to  adopt  by-laws.  "  It  is  to 
be  regretted,"  says  the  court,  "  that  the  Legislature  was  not 
more  specific  in  making  the  grant  of  power  thus  intended  to 
be  conferred.  .  .  .  That  there  are  limits,  however,  beyond 
which  the  corporation,  by  its  by-laws,  cannot  go,  is  undoubted. 
(1.)  The  amount  of  the  fine  must  be  reasonable.  (2.)  It  can 
be  imposed  only  by  way  of  punishment  for  some  delinquency 
in  the  performance  of  a  duty  which  the  member  may  owe  to 

1  Three    Towns   British    Mutual  charging  (a)  interest  at  a  certain 

Deposit  and  Loan  Society  (Lim.)  v.  rate  per  cent.,  to  run  from  the  dale 

Doyle,  7  L.  T.  Rep.,  N.  S.  276;  8.  of  the  default  to  that  of  final  pay- 

C.,  11  W.  R.  22;  13  C.  B.,   N.  8.  ment  of  the  amount  due;  and  (6)"a 

290;    [106  Engl.   C.    L.    Rep.]     It  conventional  penalty  at  a  certain 

is,  therefore,  said  to  be  advisable  to  rate  per  cent,  running  in  the  same 

impose  the  fines  in  proportion  to  way.       Satzungen    des   Ban  -  unti 

the  number  of  shares  held  by  the  Spar-Vereins  in  Frankfurt  am  Main, 

defaulter,  and  not  to  the  amount  of  1875. 

the  subscriptions  due  from    him.  9  Lovejoy  e.  Mulkarn,  37  L.  T., 

Davis,  Law  of  Building,  etc.,  Soci-  N.   8.  77;  46  L.  J.,  Ch.   Div.  630. 

eties,  p.  233.     In  German  building  But  that  amount  was   chargeable 

associations  the  penalty  is  fixed  by  beyond  I  lie  six  months. 


§  411.]  FIXES.  407 

the  corporation  by  reason  of  his  membership.  (3.)  It  is  un- 
reasonable, and  therefore  we  assume  that  the  Legislature  did 
not  intend  that  more  than  one  fine  should  be  imposed  for  the 
same  delinquency."  '  The  court  further  declares,  that  the 
application  of  these  tests  cannot  be  resisted  on  the  ground 
that  tines  imposed  under  such  by-laws  must  be  regarded  as 
conventional  between  the  corporation  and  the  member.  The 
by-laws  are  undoubtedly  adopted  by  a  majority  ;  but  the  Legis- 
lature did  not  intend  that  the  assent  of  the  minority,  or  of  any 
member,  to  the  imposition  of  fines,  should  in  all  cases  be  con- 
clusively presumed.  The  true  intention  was,  that  the  power 
to  assess  unreasonable  fines,  or  to  assess  for  any  other  cause 
than  the  delinquency  of  a  corporator,  or  to  assess  twice  for  the 
same  offence,  should  not  exist  in  the  corporation.  A  second 
tine  for  the  nonpayment  of  the  same  due  is  a  second  punish- 
ment for  the  same  offence.  The  nonpayment  of  the  same 
stated  due,  at  a  subsequent  day,  is  not  a  new  offence.  The 
obligation  to  pay,  when  the  due  first  matured,  was  complete. 
No  new  obligation  to  pay  it  is  undertaken  by  the  member  ; 
but  the  obligation  or  duty  to  pay  it  at  maturity  continues  after 
default,  until  payment  be  made.''1 

§  411.  If  the  effect  of  this  last  case  is  designed  to  be,  to 
declare  the  charging  of  a  second,  or  any  number  of  subsequent 
fines,  for  continued  default  in  the  payment  of  the  same  due, 
necessarily  and  under  all  circumstances  unreasonable  and  ille- 
gal, without  regard  to  the  wording  of  the  by-law  imposing  it, 
or  to  the  proportion  the  fine  bears  to  the  amount  of  the 
arrears,  when  the  statute  contains  no  restriction  upon  the 
building  association  in  this  particular ;  its  doctrine  is  probably 
too  sweeping.  Such  impositions  have  been  passed  by  courts  • 
repeatedly  without  question,3  and  in  New  York  it  was  dis- 
tinctly said  that  a  member  may  not  only  become  liable  to  a 
fine  for  neglect  to  pay  his  dues,  but  to  additional  fines  for 
continued  neglect,  and  entitled  to  relief  only  when  there  had 

1  Ilmrerman     et  al.  v.   The  Ohio  "See  Lovejoy  v.  MulUarn.  :!7  L. 

Building  and  Savings  Association,  T.,  N.  S.  77;  46  L.  J.,  Ch.  Div.  630. 

25  Ohio  St.  186.  And  sec,  »>ipr<i,  the  grounds  upon 

1  See,  to  the  same  effect,  Forest  which  the  English  coses  contra  were 

City  United  Land  and  Build.  Ass'ii  ruled. 
c.  Gallagher  et  al.,  25  Ohio  St.  208. 


408  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  XV. 

been  deception  practised  upon  him,  or  the  operation  of  the 
rule  \vas  manifestly  tttd  outrageously  oppressive.1  The  ca.-e  in 
Maryland,  in  which,  also,  it  was  held  that  only  one  line  could 
be  charged  for  the  neglect  to  pay  a  certain  instalment,  turned 
like  the  English  cases  above  referred  to,  upon  the  wording 
of  the  article  of  the  by-laws  :  "  If  any  stockholder  shall  neg- 
lect or  refuse  to  pay  his  weekly  dues  as  often  as  the  same  .-hall 
l)e  payable  as  aforesaid,  every  stockholder  so  neglecting  or  re- 
fusing, shall  forfeit  and  pay  the  additional  sum  of  ten  cents 
for  every  share  of  stock  by  him  held,  for  every  such  weekly 
neglect  or  refusal,  to  be  charged  with  the  weekly  dues." 
Upon  this  rule  it  was  held  that  only  one  fine  could  be 
charged.*  Similarly,  in  Pennsylvania,  under  the  following 
clause  in  the  articles  of  the  association  :  "In  case  any  stock- 
holder shall  neglect  or  refuse  to  pay  his,  her,  or  their  monthly 
dues  or  interest,  such  stockholder  shall  forfeit  and  pay  the 
additional  sum  of  ten  cents  on  each  dollar  due  by  him,  her,  or 
them,  for  every  such  monthly  refusal  or  neglect,  to  be 
charged  with  the  monthly  dues ;  but  no  fines  shall,  in  any 
case,  be  charged  on  fines."  The  court  held  this  clause  to  be 
so  worded  as  to  exclude  the  imposition  of  fines  for  the  un- 
paid dues  of  past  months.3 

§  412.  But  the  courts  have  been  unanimous  in  discounte- 
nancing a  repeated  imposition  of  the  same  fine  increased, 
every  time,  upon  the  principle  of  arithmetical  progression. 
Thus,  where  the  fine  upon  each  share's  dues  in  arrear  was,  for 
the  first  month,  12  cents ;  for  the  second  month,  37  cents ; 
for  the  third  month,  75  cents;  for  the  fourth  month,  $1.25, 
and  for  every  following  month  50  cents  more  than  the  amount 
charged  in  the  preceding  one,  the  rate  was  held  to  be  unrea- 
sonable and  exorbitant.4 

1  The  Citizens'  Mutual  Loan  and  8  Building    Association  v.  Schul- 

Accumulating  Fund  Association  v.  ler,  3  W.  N.  C.  431. 

Webster,  25  Barb.  (N.  Y.)  263.     See  4  Second  New  York  Building  As- 

also  Building  Association  v.  George,  sociation  v.  Gallier,  cited  by  Birds- 

3  W.  N.  C.  (Pa.)  239.  eye,   J.,   in    the  Citizens'    Mutual 

*  Shannon  v.  The  Howard  Mutual  Loan  and  Accumulating  Fund  As- 
Building  Association  of  the  City  of  sociation  v.  Webster,  25  Barb.  (N. 
Baltimore,  36  Md.  383.  Y.)  263. 


§  414.]  FINES.  409 

Proper  Measure  of  Fines. 

§  413.  The  proper  measure  of  fines  is  the  real  damage 
the  building  association  sustains  from  the  failure  of  a  mem- 
ber to  pay  his  dues,  which  damage  is  really  equal  to  interest 
upon  the  amount,  together  with  the  proportion  coming  to  it 
from  the  then  obtainable  premiums  upon  the  sale  of  money.1 
The  fine  should  be  slightly  in  excess  of  this,8  so  as  to  make 
it  more  profitable  to  the  member  to  pay  promptly  than  to  lag 
behind.  "  The  fines  should  be  placed  at  a  figure  but  slightly 
in  excess  of  the  average  profit  which  would  be  earned  by  the 
subscription  if  punctually  paid  and  regularly  invested  in  the 
legitimate  business  of  the  society.  ...  It  is  true  that 
those  who  suffer  have  made  the  law  which 'binds  them,  or 
subscribe  and  agree  to  it  on  becoming  members,  but  through 
ignorance  of  those  who  draw  the  rules,  the  law  is  often  made 
unnecessarily  oppressive.  A  fine  of  from  one  to  two  per 
cent,  per  month,  would  in  nearly  all  cases,  be  sufficient  and 
just.  A  default  in  payment  implies  weakness,  for  the  time 
being,  at  least ;  why,  then,  should  the  overburdened  be  fur- 
ther oppressed  ?  If  one  stumbles  under  a  weary  load,  can  he 
rise  the  better  if  his  burden  is  increased  to  twice  its  original 
size  while  he  is  prone  upon  the  earth?"  Excessive  fines 
tend  directly  to  destroy  the  primary  object  of  the  society's 
usefulness, — the  assistance  of  those  who  have  small  means. 
These  are  also,  in  most  cases,  precisely  the  ones  whose  lack 
of  experience  and  forethought  would  fail  to  prompt  or  enable 
them  to  scrutinize  provisions  in  the  rules  of  societies  they 
might  desire  to  join,  and  to  calculate  beforehand  whether 
they  were  likely  or  not  to  operate  oppressively  upon  them. 

Fines  must  be  Imposed  for  Derelictions  in  Duties  Incident  to  Mem- 
bership.   Depositors. 

§  414.  An  authority  given  by  statute  to  building  associa- 
tions to  impose  fines  upon  its  members,  does  not  authorize 
their  imposition  upon  persons  holding  the  relation  of  de- 
positors merely.4  It  is  an  incident  to  membership,  and  justi- 

1  Ocraulgee  Building   and    Loan  3  Davis,    T.:i\v   of  Building,  etc., 

Association    t>.   Thomson,    52  Qa.  Societies,  p.  165. 

427.  *  Hagerman  et  al.  v.  Ohio  Building 

*  Ib.  and  Savings  Ass'n,  25  Ohio  St.  186. 


410  THE   LAW   OF   BUILDING   ASSOCIATIONS.        [CH.  XV. 

fiable  only  on  the  ground  of  a  member's  full  participation 
in  the  profits  of  a  scheme  of  mutual  gains  and  liabilities 
which  does  not  extend  to  any  but  members. 

Fines  upon  Interest. 

§  415.  The  distinction  which  is  taken  in  Ohio,1  between 
the  legality  of  fines  imposed  under  the  statute,  upon  neglect 
of  dues,  and  fines  upon  default  in  the  payment  of  interest 
on  a  loan,  does  not  appear  to  be  founded  in  reason  or  upon 
authority.  Fines  in  the  latter  case  are  there  held  to  be 
illegal,  because,  the  object  of  lines  being  to  reach  the  mem- 
ber in  his  relation  as  member,  the  statute  did  not  contem- 
plate exposing  him,  under  the  same  clause,  to  additional  and 
separate  penalties,  in  a  character  which  is  distinct  from  that 
of  membership,  viz. ;  that  of  debtor.2  Were  the  advance- 
ment by  the  building  association  to  its  member  a  mere  loan, 
and  the  payment  of  interest  a  mere  consideration  for  the  for- 
bearance of  that  loan,  this  reasoning  might  be  held  to  be 
decisive.  But  its  force  is  materially  diminished  when  it  is 
remembered  that  the  transaction  is  not  one  of  loan  only,  and 
that,  when  the  advancement  is  taken,  the  payment  of  interest, 
or  its  equivalent,  under  some  other  name,  is  just  as  much  a 
duty  belonging  to  membership  as  the  payment  of  dues.  It 
is  added  to  the  common  fund  ;  it  is  reinvested  for  the  benefit 
of  the  borrower  as  well  as  of  his  fellows ;  it  is  a  substantial 
element  in  the  achievement  of  the  final  result,  the  liquidation 
of  all  shares  at  their  par  value,  in  which  all  the  members  of 
the  society,  whether  borrowers  or  investors,  are  equally  in- 
terested. A  share  of  the  profits  made  upon  the  investor's 
contributions  goes  to  make  up  the  accumulation  upon  the 
borrower's  shares,  by  means  of  which  his  debt  is  to  be  can- 
celled. And  equally  does  the  whole  plan  contemplate  the 
prompt  payment  of  interest  or  redemption  moneys.  The 
loan  itself  is  granted  to  the  member  on  the  ground  of  his 
membership  relations,  and  it  cannot  lie  in  his  mouth,  as  to 
the  duties  arising  from  the  loan,  to  deny  the  application  of 
the  principles  which  govern  those  relations  after  the  most 

1  See  case  in  preceding  note.  25  Ohio  St.  186;  Forest  City  Unit- 

*  Hagerman  et  al.  v.    The  Ohio     ed  Land  and  Building  Association 
Buildiug  and  Savings  Association,     ».  Gallagher  et  al. ,  Ib.  208. 


§415.]  FINES.  411 

signal  benefit  they  are  intended  to  secure  has  been  conferred 
upon  him. 

In  Parker  v.  Butcher*  decided  in  1867,  the  loan  was 
repayable  by  monthly  contributions  covering  principal  and 
interest,  and  imposed  fines  for  nonpayment  of  contributions 
at  the  rate  of  a  shilling  per  pound  per  month.  It  was  con- 
tended that  this  imposed  a  penal  interest  of  sixty  per  cent, 
for  every  installment  of  principal  and  interest  due  from  the 
advanced  member  so  long  as  it  was  in  arrear,  and  that  this 
was  unreasonable.  But  Romilly,  M.  R.,  deciding  that  the 
fine  was  reasonable,  and  that  the  borrower  could  not  redeem. 
a  mortgage  to  the  society  without  paying  the  fines  he  had 
incurred,  said : — "  I  see  nothing  unreasonable  in  it.  It  is  a 
matter  well  understood  between  the  contracting  parties,  and 
it  is  a  contract  which,  in  the  absence  of  all  fraud  or  undue 
pressure,  the  parties  were  perfectly  competent  to  enter  into. 
Neither  do  I  see  anything  in  the  shape  of  forfeiture  in  the 
transaction.  It  is  true  that  the  court  will  not  allow  a  person 
to  contract  to  receive  a  given  rate  of  interest,  and  to  stipulate, 
that,  if  not  paid,  the  rate  of  interest  shall  be  increased,  but 
this  has  no  resemblance  to  that  case.  It  is  simply  such  a 
transaction  as  the  following:  One  man  lends  to  another 
£100,  to  be  repaid  on  a  given  day,  and  if  it  be  not  repaid  on 
that  day,  it  shall  bear  interest  at  the  rate  of  sixty  per  cent. ; 
that  is,  no  doubt,  a  high  rate  of  interest,  but  since  the  repeal 
of  the  usury  laws  I  see  nothing  illegal  in  the  transaction  if 
there  be  no  concealment  and  no  undue  pressure,  and  the 
parties  perfectly  understand  and  assent  to  the  contract.  If, 
then,  such  a  transaction  is  legal,  does  it  become  illegal  U'- 
cause  the  loan  is  to  be  repaid  by  instalments,  as  if  a  man  lent 
another  £100,  to  be  repaid  by  sums  of  £10  per  month,  with 
interest  at  the  rate  of  sixty  per  cent,  on  every  instalment  un- 
paid ?  I  think  it  does  not." 

The  doctrine  of  this  case  is  applicable  to  fines  upon  in- 
terest in  building  associations  of  this  country,  except  that 
what  is  there  regarded  as  practically  a  mere  reservation  of 
interest,  since  the  repeal  of  the  usury  laws,  lawful  to  no 
matter  what  exorbitant  extent,  is  here  treated  as  "in  the 
nature  of  liquidated  damages,  agreed  to  be  paid  for  the  non- 
1  Law  Rep.,  8  Eq.  762;  36  L.  J.,Ch.  552. 


412  THE   LAW   OF  BUILDING    ASSOCIATIONS.        [CH.  XV. 

performance  of  a  promise  ;md  covenant," '  and  enforcible 
only  "where  they  arc-  not  unconscionable  or  disproportionate 
to  the  exigency  of  the  case."  *  In  neither  instance,  however, 
are  fines  in  building  associations  considered  to  be  "  for- 

O 

•i tu res"  or  punishments  for  offences.  It  is  believed,  too, 
that  the  imposition  of  tines  for  the  nonpayment  of  inter 
either  expressly,  or  by  assessing  tines  at  a  certain  ratio  upon 
the  amount  owing  by  the  member  as  dues  (in  which  are  in- 
cluded the  monthly  installments  of  interest),  is  customary  and 
usual  among  building  associations.  And  where  the  intention 
of  the  statute  to  limit  the  imposition  of  fines  to  defaults  in 
stock-payments  only  is  not  so  clear  as  to  admit  of  no  question, 
it  would  seem  that  the  testimony  of  the  common  practice 
among  these  societies  in  favor  of  its  own  usefulness  and 
v  reasonableness  should  be  entitled  to  some  weight. 

§  416.  But  where,  under  the  statute  or  the  rules  of  the 
society,  the  installments  on  account  of  stock-payments  and  of 
interest  are  lumped  in  one  periodical  contribution,  and  the  fine 
is  levied  at  a  certain  rate  per  share,  it  is  improper  to  divide 
the  whole  sum  into  its  constituent  elements,  so  as  to  levy  two 
tines  for  its  nonpayment, — one  on  account  of  dues  of  stock-pay- 
ments, or  principal ;  the  other  on  account  of  dues  of  interest. 
Thus,  in  Maryland,  the  court,  holding  that  the  statute  de- 
signed the  joining  of  the  two  kinds  of  dues  in  one  periodical 
payment,  declares :  "  There  is  no  reason  nor  authority  under 
the  law,  for  the  subdivision  of  the  principal  and  interest,  and 
separate  and  independent  by-laws,  imposing  distinct  fines  for 
the  nonpayment  of  each ;" — and  the  building  association  was 
not  permitted  to  recover  the  fines  assessed  under  a  by-law 
authorizing  their  imposition  for  default  upon  dues  of  inter- 
est, at  the  rate  of  ten  cents  per  share,  the  same  fine  being 
previously  and  additionally  charged  for  defaults  in  the  dis. 
charge  of  stock-payments  and  principal.3  "  The  weekly 
instalments  and  weekly  interest  constitute  but  one  debt,  and 
the  weekly  interest,  according  to  our  construction  of  the  terms 

1  Shannon  «.  The  Howard  Mutual  *  See  cases  in  preceding  note. 

Building  Association  of  the  City  of  *  Shannon  t>.  The    Howard  Mu- 

Baltimore,  36  Md.  383;  Ocmulgee  tual  Building   Association  of   the 

Building  and  Loan  Association  v.  City  of  Baltimore,  ubi  supra. 
Thomson,  52  Ga.  427. 


§  418.]  FINES.  413 

of  the  law,  ought  to  be  included  in  the  weekly  dues,  .... 
that  is,  the  portion  of  the  principal  properly  so  called  payable 
weekly,  and  the  proportional  interest,  weekly  payable,  con- 
stitute the  weekly  instalment,  and  make  up  the  weekly  in- 
debtedness, which,  if  not  paid  punctually,  subjects  the  party 
to  a  fine,  if  the  company  think  proper  so  to  determine  by  its 
by-laws." l  But  there  cannot  be  two  distinct  fines  imposed, 
one  for  each  of  the  actual  ingredients  of  the  single  debt.3 

Interest  upon  Fines. 

§  417.  Interest  can  never  be  charged  upon  fines  standing 
against  a  member.  If  they  are  regarded  as  interest  agreed 
to  be  paid  to  the  society  for  nonpayment  of  installments, 
then  "to  give  the  society  interest  upon  these  fines,  would  be 
to  give  them  compound  interest,  which  is  not  in  the  contract, 
and  which  is  contrary  to  the  rules  and  principles  adopted  by 
courts  of  equity."  *  If  they  are  viewed  as  stipulated  damages, 
the  contingency  of  delay  in  their  payment  must  be  taken  to 
have  entered  into  the  calculation  of  the  amount  fixed ;  nor 
will  the  court  permit  the  debtor's  burden  to  be  aggravated 
beyond  what  he  has  clearly  undertaken  to  perform. 

Discretion  of  Directors  in  Remitting  Fines. 

§  418.  The  remission  of  fines  for  proper  reasons  shown 
is  discretionary  with  the  society  or  its  directors,  like  the 
option  of  enforcing  or  waiving  forfeitures.4  The  remission 
of  fines  may  be  justified  also  upon  the  general  ground  of  the 
society's  right  to  compromise  with  its  members  and  debtors.* 
The  liability  for  fines  is  not  suspended  by  the  bringing  of 
suit  by  the  association  against  the  member.* 

1  Shannon  v.  The  Howard  Mutual  4  See  ante,  §§  99-102. 

Building  Association  of  the  City  of  l  See  ante,  §  323.     The  function 

Baltimore,  ubi  supra.  of  fines  to  secure   the  services  of 

*  Parker  v.  Butcher,  36  L.  J.,  Ch.  members  as  officers,  and  the  faith- 

552;  Law  Rep.,  3  Eq.  762;  Ingoldby  ful  performance  of  their  duties  as 

t>.  Riley,  28  L.T.,  N.  S.  55;  Clarkville  such,  as  well  as  the  attendance  of 

Building  Association  c.  Stephens  et  members  at  meetings  has,  already 

al.,  11  C.  E.  Gr.  (N.  J.)  351.  been  sufficiently  adverted  to.    See 

8  Romilly,   M.  R,   in  Parker  t>.  ante.  §§  92-95.  103,  220. 

Butcher,  supra.  •  See  ante,  §  91. 


414  THE    LAW   OF   BUILDING   ASSOCIATIONS.       [CH.   XVI. 


CHAPTER  XVI. 

MORTGAGES. 

§  419.  Right  to  take  mortgage  security  involved  in  power  to  make  loans 

or  advancements.     Mortgageable  estates. 

§  420.  Validity  of  mortgage  security  under  statute  and  by-laws. 
§  421.  Examination  of  the  various  forms  of  mortgages  used  in  building 

associations.     Their  relative  propriety  and  adequacy. 
§  423.  Covenants  as  to  stock-payments,  etc. 
§  424.  Effect  and  validity  of  building  association  mortgage.     Equity 

jurisdiction. 

§  425.  Covenants  as  to  default. 

§  426.  Propriety  of  court's  looking  at  rules  to  ascertain  amount  due. 
§  427.  Rule  for  ascertaining  amount  presently  due  upon  mortgage. 
§  428.  Same  rule  applicable  in  courts  of  Jaw  and  equity.     Basis  of 

equity  jurisdiction  in  foreclosure.     Preliminary  account.    De- 
cree. 
§  429.  Discharge  of  mortgage  by  sale  of  property  does  not  necessarily 

discharge  debt.     Remedy  in  such  case. 

§  430.  Terms  of  mortgage  preclude  withdrawal.     Right  of  repayment. 
§  431.  Sale  upon  mortgage,  and  application  of  proceeds  of  sale  and 

value  of  stock  to  debt,  extinguish  membership  of  debtor. 
§  432.  Mortgage  (or  decree  after  preliminary  account),  after  payment 

of  amount  due  stands  as  security  for  future  membership  duties. 

Rights  of  mortgagee  in  possession. 
§  433.  Errors  and  omissions  in  mortgages. 
§  435.  Purchaser  subject  to  building  association  mortgage. 
§  436.  Building  association,  mortgagee,  may  exercise  all  the  powers 

given  it  concurrently,  notwithstanding  its  rules. 
§  437.  Tender  upon  building  association  mortgage. 
§  438.  Taxation  of  mortgages  held  by  building  association.    Power  of 

Legislature  to  remit. 
§  439.  Exemption  of  building  association  mortgages  in  England  held  to 

include  mortgages  by  strangers. 
§  440.  Members'  mortgages  held  by  building  associations,  are  not  assets 

for  the  purpose  of  winding  up,  but  for  taxation  of  its  personal 

property. 

Right  to  Take  Mortgage  Security  Involved  in  Power  to  Make  Loans 
or  Advancements.    Mortgageable  Estates. 

§  419.  The  power  granted  to  building  associations  to 
make  loans  or  advancements  to  their  members,  upon  certain 
reservations  and  agreements,  necessarily  involves  the  right  to 
take  mortgage  security  for  the  performance  of  the  conditions 


§  420.] 


MORTGAGES. 


415 


of  the  contract.1  The  mortgage,  it  seems,  may  be  upon  free- 
hold or  leasehold8  property;  upon  legal  or  equitable  titles.* 
It  may  be  upon  the  lands  of  the  borrowing  member,  or  upon 
those  of  another  and  outside  person  submitting  his  property 
to  the  encumbrance  as  security  for  the  debt.4  The  bond 
given  by  the  member  constitutes  the  debt;  the  mortgage 
secures  it.5  What  is  the  nature  of  this  debt,  and  of  the  trans- 
action which  created  it,  and  what  its  lawful  ingredients,  has 
been  sufficiently  discussed.'  It  is  proposed  in  this  chapter  to 
examine  merely  the  building  association  mortgage  under  the 
statutes,  its  form,  and  its  effect  in  law. 

Validity  of  Mortgage  Under  Statute  and  By-Laws. 

§  420.  A  mortgage  taken  by  a  building  association  is  a 

o  o    o  «/ 

security  for  the  payment  of  money  only  within  the  statute,7 
and  operative  only  so  far  as  authorized  by  it  and  by  the  by- 


1  Massey  v.  The  Citizens'  Build- 
ing and  Savings  Association  of  Pa- 
ola,  22  Kas.  634.  And  in  Union 
Building  Loan  Association  of  New 
Brunswick  v.  The  Masonic  Hall 
Association  of  New  Brunswick  et 
al.,  2  Stew.  (N.  J.)  389,  it  is  said 
that  the  building  association  may 
take  any  security  for  its  loans 
•which  other  persons  are  in  the 
habit  of  taking.  See  ante,  §§  330- 
331. 

*  In  the  case  of  Seagrave  v.  Pope, 
15  Engl.  L.  and  Eq.  Rep.  477;  22 
L.  J.,  Ch.  258;  16  Jur.  1099;  1  De 
G.,  M.  and  G.  783;  20  L.  T.  Rep. 
158,  the  mortgage  was  given  upon 
leasehold  property  and  enforced. 

8  In  the  case  of  Lincoln  Building 
and  Savings  Association,  appellee, 
v.  Haas  et  al.  appellants,  10  Neb. 
581,  a  mortgage  upon  an  equitable 
title  was  enforced.  It  purported  to 
be  upon  the  fee  simple,  and  it  was 
held  that  it  was  not  defeated  by  a 
subsequent  purchase  of  the  fee  sim 
pie  by  one  who  procured  a  quit- 
claim deed  from  the  holder  of  an 
equitable  title.  In  Bismarck  Build- 


ing and  Loan  Association  v.  Bol- 
ster et  al.,  92  Pa.  St.  123,  the  build- 
ing association  had  taken  a  chattel 
mortgage,  the  propriety  of  which 
was  not  questioned.  But  it  was 
said  by  the  court  that  acts  which 
relate  exclusively  to  mortgages  of 
"real  estate,"  have  no  relation  to 
mortgages  on  leaseholds,  as  the 
mortgage  in  this  case  was. 

4  Massey  v.  The  Citizens'  Building 
and  Savings  Association  of  Paola, 
ubi supra;  Juniata  Building  Asso- 
ciation v.  Mixell,  84  Pa.  St.  313; 
Tanner's  App.,  11  Pittsb.  Leg.  Jour. 
(Pa.)  301;  Relief  Saving  Fund  As- 
sociation v.  Longshore  et  al.,  8  Luz. 
Leg.  Reg.  (Pa.)  199. 

6  See  Eagle  Beneficial  Society's 
App.,  75  Pa.  St.  226  ;  but  subse- 
quent purchasers  and  mortgagees 
need  not  go  beyond  the  face  of 
the  mortgage,  unless  there  be  some- 
thing in  the  recital  of  the  bond  in 
the  mortgage  to  put  them  upon  in- 
quiry. 

•  See  ante,  §§  326-357.  369-387. 

1  Franklin  Building  Association 
v.  Mather,  4  Abb.  Pr.  (N.  Y.)  273. 


416  THE   LAW   OF  BUILDING   ASSOCIATIONS.       [CH.  XVL 

laws  of  the  association,  and  in  conformity  therewith.1  No 
reservation  inserted  in  the  mortgage,  therefore,  which  is  not 
contemplated  by  statute  and  by-law,  can  be  enforced  under  it." 
Hence,  where  a  building  association  was  incorporated  by  a 
special  act,  its  charter  authorizing  it  to  grant  loans  at  a  pre- 
mium, taking  mortgages  from  the  borrowers  for  the  payment 
of  installments  to  the  end  of  the  society's  running,  together 
with  tines  and  interest  on  the  par  value  of  the  shares  ad- 
vanced ;  a  mortgage  so  written  as  to  include  the  sum  actually 
advanced,  and  making  it  repayable,  with  interest  from  date, 
in  case  any  default  should  be  made  by  the  borrower  in  the 
payments  undertaken  by  him,  was  held  to  be  priina  facie  in 
violation  of  the  constitution  of  the  association.  And  it  was 
left  to  the  jury  to  determine  whether  the  mortgage  was 
drafted  so  as  to  include  the  sum  paid  to  the  member  by  the 
association  as  the  price  of  the  redemption  of  his  stock,  by  ac- 
cident, mistake,  or  by  ignorance  of  the  draftsman  ;  or  by  de- 
sign and  on  purpose,  with  the  knowledge  of  the  society,  and 
with  a  view  to  oppression  and  wrongful  exaction.  In  the 
former  case,  the  deed  might  be  reformed  and  corrected  and 
then  sustained ;  in  the  other  case,  declared  void  for  fraud  and 
circumvention.  At  all  events,  it  was  said  to  be  error  in  the 
court  below — when  asked  by  the  mortgagor  to  cancel  the  mort- 
gage, and  enjoin  the  building  association  from  selling  the  land 
conveyed  in  the  mortgage,  and  from  further  proceedings — to 
refuse  the  injunction  peremptorily  where  the  facts  appeared 
as  above.'  It  may  be  laid  down,  therefore,  as  a  rule,  that, 
where  the  statute  or  charter  under  which  a  building  associa- 
tion is  incorporated,  defines  the  formal  conditions  and  cov- 
enants which  may  be  embodied  in  the  mortgage,  with  a  view 
to  attaining  the  results  contemplated  by  the  act,  these  details 
must  be  strictly  and  technically  followed  out : 4  where,  how- 

1  Shannon  v.  The  Howard  Mutual  ics*  Building  and  Loan  Association, 

Building  Association  of  the  City  of  78  N.  C.  372.      See  also  the  Bal- 

Baltimore,  36  Md.  383.  timore    Permanent    Building    and 

•  Ib. ;  Hagerman  et  al.  v.  The  Ohio  Land  Society  v.  Taylor,  41  Md.  409; 

Building  and  Savings  Association,  Birmingham  et  al.  v.  The  Maryland 

25  Ohio,  186;  Building  Association  Land   and   Permanent    Homestead 

v.  Schuller,  3  W.  N.  C.  (Pa.)  431;  Ass'n.  45  Id.  541;  and  ante,  §383. 

and  ante,  §  383.  *  The    importance    of    observing 

1  Smith  and  wife  v.  The  Meclian-  this  rule   is  in  the  fact  that  the 


§  421.]  MORTGAGES.  417 

ever,  the  statute  and  charter  make  provision  merely  for  the 
results  to  be  worked  out  by  the  scheme,  a  greater  latitude  ob- 
tains, and  every  fonn  of  mortgage  or  security  which  ensures 
that  result  may  be  adopted  by  the  association. 

Examination  of  the  Various  Forma  of  Mortgages  Used  in  Building  As- 
sociations.    Their  Relative  Propriety  and  Adequacy. 

§  421.  There  are  principally  three  classes  of  mortgages 
used  in  building  associations,  any  particular  one  being  adopted 
accordingly  as  the  intention  of  the  Legislature  seems  best 
served  by  its  peculiar  form :  (1)  That  in  which  the  fact  of  an 
advancement  upon  or  redemption  of  shares  is  recited,  and  the 
condition  calls  for  regular  stock-payments  of  fixed  amounts, 
and  performance  of  membership  duties  and  liabilities  gener- 
ally, together  with  the  payment  of  redemption  money  or  in- 
terest on  the  amount  advanced  (being  frequently  lumped  to- 
gether with  stock-payments  under  the  name  of  dues)  to  the 
end  of  the  society's  existence ;  (2)  that  in  which,  in  addition, 
the  sum  advanced  is  made  repayable ;  (3)  that  in  which  the 
nominal  amount  of  the  loan,  the  par  value  of  the  shares  ad- 
vanced, thus  including  the  premium,  is  made  payable,  with 
interest  (upon  that  whole  sum,  or  only  upon  the  actual  ad- 
privileges  conceded  to  building  as-  England.  It  is,  of  course,  within 
sociations  are  so  extraordinary,  that  the  power  of  the  Legislature  to  pre- 
the  courts  will  measure  their  exer-  scribe,  if  it  so  chooses,  in  detail, 
cise  by  the  precise  extent  of  the  every  reservation,  modo  et  fonnn, 
terms  of  the  law,  and  any  deviation  which  shall  be  made  in  these  mort- 
from  the  prescribed  course  will  ren-  gages ;  and  if  it  does  so,  it  is  the  busi- 
der  the  transaction  unlawful  and  ness  of  the  associations  to  conform 
usurious.  Unless  there  is  a  posi-  with  that  requirement.  But  unless 
live  statutory  or  charter  direction  there  be  such  an  one  (either  iu 
as  to  the  form  of  the  covenants  to  statute  or  in  charter),  not  only  ex- 
be  inserted  in  the  mortgage,  there  plicit.  but  exclusive  of  every  other 
seems  no  reason  for  regarding  one  substantially  like  method,  there  ia 
form  more  appropriate  to  a  build-  no  sufficient  reason  given  any  where 
niir  association  loan  than  another,  for  limiting  the  associations  in  this 
when  both  secure  substantially  the  particular:  and  where  this  is  done,  it 
same  thing.  It  has  already  been  is  because  of  adefective  undersiand- 
seen  that  the  reservation  of  the  pay-  ing  of  the  real  nature  of  the  trans- 
ment  of  principal  and  interest  is,  action  of  a  building  association  loan, 
in  effect,  identical  with  that  of  looking  at  the  mere  surface  of  the 
mere  dues,  etc.  See  £§  330-332.  paper  which  is  the  evidence  of  a 
Both  forms  are  used  under  statutes  portion  of  the  contract,  instead  of 
exceedingly  similar.  No  distinction  examining  the  substance  of  tluj 
has  been  made  on  that  ground  in  whole  coflvi'act  itself. 


418  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [CH.  XVI. 

vance,  accordingly  as  the  statute  may  sanction  the  one  or  the 
other),  stock-payments,  etc.,  being  stipulated  as  in  the  other 
cases.  Every  one  of  these  forms  covers  a  greater  or  lesser 
portion  of  one  and  the  same  contract  between  the  society  and 
its  borrowing  member.  This  contract,  it  has  already  been 
seen,1  includes  (1)  the  borrower's  consent  to  the  payment  of 
a  premium,  to  be  retained  by  the  society  out  of  his  final  credit 
in  its  funds ;  (2)  the  discharge  of  regular  stock-payments,  and 
all  other  duties  incident  to  membership  during  the  society's 
existence,  looking  forward  to  the  raising  of  the  value  of  his 
shares  to  an  amount  equal  to  the  sum  advanced,  plus  the 
premium ;  (3)  a  relinquishment  to  the  society,  as  a  reim- 
bursement or  repayment  of  the  advance,  of  the  accumulation 
standing  to  the  credit  of  the  borrower's  shares  (equal  to  their 
estimated  par  value)  upon  final  distribution  ;  (4)  the  payment 
of  interest,  or  its  equivalent,  in  the  shape  of  redemption 
money,  during  the  interval  between  the  taking  of  the  ad- 
vance and  the  ultimate  settlement.  It  is  clear,  that,  the  con- 
tract embracing  all  these  subsidiary  or  constituent  undertak- 
ings, being  struck  between  the  building  association  and  its 
member,  and  becoming  immediately  executed,  as  to  the 
society,  by  the  handing  over  the  sum  agreed  to  be  advanced, 
the  only  portions  of  it  that  really  require  any  security  to  be 
given  by  the  member  for  performance  are  those  relating  to 
the  discharge  of  stock-payments,  interest,  and  membership 
•duties,  including  fines  and  similar  charges.  This,  therefore, 
is  all  that  is  covered  by  mortgages  belonging  to  the  first  class 
above  indicated,  and  this  is  the  mortgage  originally  and  most 
legitimately  adopted  by  building  associations. 

The  next  form  goes  a  step  farther,  expressing,  upon  the 
face  of  the  mortgage,  that  portion,  also,  of  the  contract,  which 
consists  of  an  undertaking  to  return  the  sum  actually  ad- 
vanced. The  manner  in  which  it  is  to  be  done,  viz. ;  by  the 
relinquishment  of  stock-accumulations  at  the  termination  of 
the  scheme,  is  sufficiently  indicated  by  the  concurrent  stipula- 
tion for  the  payment  of  dues  to  the  end  of  the  society's  run- 
ning. It  adds  no  new  undertaking  to  the  elemental  con- 
tract ;  but  it  lends  to  the  whole  transaction  something  of  the 
appearance  of  a  loan,  repayable  in  numerous  small  installments, 
1  See  ante,  §  326. 


§  422.]  MORTGAGES.  419 

but  bearing  interest  upon  the  original  sum  from  the  begin- 
ning to  the  end.  The  third  form  differs  from  this  only  in 
that  the  remaining  element  of  the  whole  contract  is  brought 
under  the  protection  of  the  mortgage  security,  by  stipulating 
for  the  eventual  payment,  not  only  of  the  amount  advanced, 
but  also  of  the  premium  bid,  both  of  which,  together,  make 
up  the  full  value  of  the  shares  advanced,  or,  as  it  is  called, 
the  nominal  amount  of  the  loan.  But  in  this  case,  also,  the 
stipulation  for  stock -payments,  etc.,  is  the  characteristic  and 
decisive  one.  "  The  obligation  ...  is  nominally  for  the  re- 
payment of  the  loan,  but  particularly  for  the  payment  of  the 
monthly  dues  on  the  stock,  and  legal  interest  on  the  loan  until 
the  association  is  able  to  divide,  to  each  share  of  stock  held  by 
the  members,  the  sum  of  two  hundred  dollars  [or  whatever 
the  par  value  of  the  shares  may  be],  and  when  this  result  is 
reached,  as  the  association  would  owe  a  borrower  on  five  shares 
of  stock  $1000,  and  the  borrower  would  also  owe  the  associa- 
tion $1000,  one  debt  cancels  the  other,  and  the  loan  is  paid 
off." '  The  fact  that  interest  may,  under  some  statutes,  be 
charged  upon  the  premium  bid,  as  well  as  on  the  sum  actually 
advanced,  is  an  anomaly,2  which,  whilst  it  does  no  credit  to 
the  possible  sagacity  of  the  legislators  sanctioning,  nor  to  the 
sense  of  justice  of  the  society  exacting  it,  does  not,  in  any 
wise,  affect  the  nature  of  the  transaction. 

§  422.  By  none  of  these  forms,  therefore,  is  there  added 
to  the  contract  itself  anything  which  is  wanting  to  it  under 
either  of  the  remaining  forms.  The  difference  lies  merely 
in  the  relative  number  of  the  elements  secured  by  mortgage, 
all  equally  belonging  to  the  entire  transaction,  but  set  forth 
and  confirmed,  in  one  form,  more  or  less  in  detail,  than  in 
another.  It  is  possible  that,  by  the  wording  of  a  statute,  the 
society  under  it  may  be  precluded  from  taking  mortgage  se- 
curity for  more  than  some  particular  portion  of  this  contract, 
and  that  a  stipulation  contained  in  the  deed  beyond  this  limit 
must  be  deemed  unlawful.3  Certain  it  is,  that  the  mortgage 
securing  the  continued  and  regular  payment  of  dues  to  the 
end  of  the  scheme,  either  including  therein  the  redemption 
money  or  interest,  or  with  an  additional  stipulation  for  the 

1  Wrigley,    Workingman's   Way        «  See  ante,  §  856. 
to  Wealth,  p.  67.  *  See  ante,  §  420. 


420  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [cU.  XVI. 

payment  of  interest  on  whatever  sum  the  law  may  allow  its 
reservation,  and  providing,  in  case  of  defaulj  in  any  such  pay- 
ment, for  the  imposition  of  fines,  as  well  as  generally  for  the 
observance  of  all  membership  duties  and  liabilities,  covers 
everything  for  which  there  is  any  need  of  a  continuing  secu- 
rity. In  none  of.  the  remaining  elements  of  the  contract,  is 
a  breach  on  the  part  of  the  member  within  the  range  of  legal 
possibilities.  By  the  payment  of  the  money  agreed  to  be 
advanced,  the  contract  is  so  far  executed  as  to  preclude  the 
borrower,  in  the  absence  of  fraud,  or  circumstances  amounting 
to  fraud,  from  resisting  its  consummation ;  and  if  such  crook- 
edness occur  in  it,  the  parchment  and  seal  and  solemn  attesta- 
tion will  not  straighten  it  into  uprightness.  Besides,  in  case 
of  a  dispute,  the  society  holds  the  key  to  the  situation.  The 
borrower's  regular  payments  and  other  membership  obliga- 
tions being  secured,  it  is  sure  to  be  in  actual  possession  of 
the  money,  which,  by  his  entire  contract,  he  has  relinquished 
to  it.  No  court  will  aid  him  in  recovering  it  from  the  soci- 
ety, unless  lie  can  show  that  the  latter  is  not  entitled  to  hold 
it ;  and  the  principles  upon  which  that  question  is  to  be 
solved,  so  far  as  it  is  a  question  of  contract,  are  too  well- 
settled  to  require  the  assistance  of  re-iteration  in  the  mort- 
gages. If  there  are  other  considerations,  arising  outside  of 
the  contract,  which  affect  the  right  of  the  society  to  retain 
the  money,  the  mortgage  stipulations,  in  emphasizing  that 
contract,  are  again  of  no  utility.  Indeed,  from  every  point  of 
view,  except  that  regarding  convenience  in  computing  the 
amount  at  any  time  payable  upon  the  mortgage,  for  purposes 
of  recovery  or  release,1  and  that  regarding  the  negotiability 
of  the  instrument,*  the  stipulations  for  the  repayment  of  the 
amount  advanced,  or  of  that  amount  plus  the  premium,  to- 
gether constituting  the  nominal  loan,  are  simply  useless  and 
redundant,  though  not,  in  any  sense,  positively  improper.  It 
is  the  stipulation  for  the  payment  of  dues,  etc.,  which  con- 
stitutes the  differentia  of  the  building  association  mortgage, 
every  legitimate  form  of  which  presents  it  as  the  essential 
peculiarity ;  but  the  class  in  which  this  characteristic  is  given 
the  most  signal  prominence — i.  e.,  where  the  stipulation  is  sim- 
ply for  dues,  etc.,  without  any  superfluous  adjuncts  concern- 
1  See  ante,  §§  331-332.  *  See  ante,  §§  331-532. 


§  424.]  MORTGAGES.  421 

ing  the  repayments — is  to  be  regarded  as  the  proper  type  of 
building  association  mortgages.  In  treating  of  them  gener- 
ally, the  other  forms  may  be  safely  disregarded.  There  is, 
at  the  bottom,  no  difference  between  them,  and  the  same 
principles,  with  very  slight  and  obvious  modifications,  apply 
to  all. 

Covenants  as  to  Stock-Payments,  etc. 

§  423.  By  the  covenants  of  such  a  mortgage,  the  borrower 
undertakes,  for  himself  and  his  heirs,  with  the  society,  their 
successors  and  assigns,  to  pay  to  the  society,  their  successors 
and  assigns,  or  to  such  other  person  or  persons,  as,  by  the 
rules  of  the  society,  or  by  the  Board  of  Directors  thereof,  shall 
from  time  to  time  be  appointed  to  receive  the  same,  at  the 
office  of  the  society  for  the  time  being,  on  a  certain  day  in 
each  succeeding  week  or  calendar  month,  as  the  case  may  be, 
a  certain  fixed  sum,  either  so  calculated  as  to  include  stock- 
payments  and  redemption  money,  or  interest,  or  with  the 
additional  stipulation  for  a  further  sum  payable  in  the  man- 
ner, and  at  the  time,  that  may  be  provided  during  the  run- 
ning of  the  society  or  series ; '  together  with  such  further 
sums,  as,  by  the  rules  of  the  society,  shall  be  payable  from  him 
or  them  to  the  society,  and  all  fines  that  may  be  lawfully  as- 
sessed against  him,  under  and  according  to  the  rules  of  the 
society ;  and  also  in  all  other  respects  to  observe  the  rules  of 
the  society." 

Effect  and  Validity  of  Building  Association  Mortgage. 

§  42-4.  On  the  face  of  it,  such  a  mortgage  secures  the  pay- 
ment of  a  series  of  small  sums  during  an  indefinite  period  of 
time.'  Yet,  though  the  time  during  which  the  payments  are 
to  be  made  is  not  specified,  there  is  a  contingency  stated  in 

1  If  this  be  not  added,  and  the  covenant  to  keep  the  premises  in 

covenant  is  merely  to  pay  each  sue-  repair,  and   insured;  pay  ground- 

cessive  week  or  month,  that  would  rent,  taxes,  etc.,  or  permit  the  so- 

amount  to  the  same  thing,  at  least  ciety  to  do  so  at  the  borrower's  ex- 

in  an  ordinary  terminating  society,  peuse.     See  ante,  §  383. 

since,  when  that  expires,  the  pay-  3  Robertson    v.    The    American 

ments  must  of  necessity  cease.    And  Homestead  Association,  10  Md.  397 ; 

probably  the  effect  would  be  the  Winchester  Building  Association  t>. 

same  in  a  series.  Gilbert,  23  Qrattan  (Va.),  787. 

9  To  this  is   properly  added   a 


422  THE  LAW   OF  BUILDING   ASSOCIATIONS.      [CH.  XVI. 

the  mortgage,  011  the  happening  of  which  the  payments  are 
to  cease ;  and  its  duration  may  be  ascertained  by  proof,  or 
approximated  with  as  much  certainty  and  exactness  as  the 
duration  of  a  mortgage  securing  an  annuity  for  the  life  of  a 
person.  The  mortgage  is,  therefore,  not  void  for  uncertainty, 
but  a  valid  mortgage  in  law.1  Nor,  though  being  for  the 
payment  of  such  trifling  sums,  does  it  fall  under  the  opera- 
tion of  the  principle  de  mini-mis  non  curat  lex,  but  it  is  prop- 
erly within  the  jurisdiction  of  a  court  of  chancery.3 

Covenants  as  to  Default. 

§  425.  In  case  these  stipulations  for  the  payment  of  dues 
and  interest  are  not  faithfully  observed  by  the  mortgagee, 
there  is  a  provision  inserted  for  the  foreclosure  of  the  mort- 
gage and  sale  of  the  encumbered  property.  The  disposition 
of  the  proceeds  of  such  sale  may  be  contracted  for  in  various 
ways.  The  most  commonly  adopted,  after  providing  for  the 
payment  of  all  arrears,  are  either  (1)  to  permit  the  overplus 
to  be  invested  by  the  society  for  the  mortgagee,  upon  trust, 
to  draw  and  apply  the  revenues,  from  time  to  time,  as  re- 
quired, to  the  payment  of  all  accruing  monthly  sums  and 
lines,  until  the  termination  of  the  building  association ;  and  it 
has  been  expressly  declared  that  such  a  provision  in  the  mort- 
gage is  valid,  and  that  under  it  the  society  was  entitled,  upon 
judgment  of  foreclosure,  to  have  a  provision  inserted  direct- 
ing the  surplus  to  be  invested  according  to  the  mortgage 
stipulations ;"  or  (2)  to  allow  the  society  to  receive  at  once, 
from  out  of  the  proceeds,  the  full  present  value  of  the  mort- 
gage, all  future  installments  being  regarded  as  immediately 
payable.4  These  future  installments,  by  the  terms  of  the 
mortgage,  are  those  which  shall  become  due  during  the 

'Ib.;    Merrill    v.     Mclntire,    13  Law  and  Eq.  Rep.  477,  where  the 

Gray  (Mass.),   157;    The  Franklin  property   was    leasehold,   and    the 

Building  Association  v.  Mather,  4  mortgage  gave  the  society  the  right 

Abb.  Pr.  (N.  Y.)  274.  to  enter  and  draw  rents,  and,  if  in- 

*  Robertson    v.    The    American  sufficient,  sell. 

Homestead  Association,  ubi  supra.  *  Where  there  is  a  stipulation  for 

*  The  Franklin  Building  Associa-  the  recovery  of   the    amount    ad- 
tion  v.  Mather,  ubi  supra.     See  also  vanced,  plus  the  premium,  i.e.,  of 
Winchester  Building  Association  t).  the  par  value  of  the  shares  advanced. 
Gilbert  et  al.,  23  Gratt.  (Va.)  787.  this  amounts  to  the  same  thing.    See 
And  Seagrave  v.   Pope,    15  Engl.  ante,  §§  330-332. 


§  42G.]  MORTGAGES.  423 

balance  of  the  entire  running  of  the  society.  In  order  to- 
ascertain  this  period,  and  thus  the  sum  payable,  it  becomes 
necessary  for  the  court  to  look  beyond  the  mortgage. 

Propriety  of  Court's  Looking  at  Rules  to  Ascertain  Amount  Due. 

§  426.  It  was  said  in  Robertson  v.  The  American  Home- 
stead Association*  that  the  court  could  not  look  beyond  the 
mortgage  itself  in  ascertaining  the  sum  due,  where  the  rules 
and  articles  of  the  building  association  were  not  so-  referred 
to  as  to  make  them  a  part  of  the  mortgage,  or  call  the  court's 
attention  to  them,  and  that  a  covenant  to  pay  "  all  lines 
imposed  by  the  articles  of  association"  does  not  make  them  a 
part  of  the  mortgage,  or  authorize  the  court  to  consider  them 
in  construing  it. 

But  this  decision  was  explained  in  the  case  of  McCahan 
v.  The  Columbian  Building  Association  of  East  Baltimore, 
No.  2,"  where  the  court  say  : — "  It  is  urged  on  the  part  of  the 
defendant  that  the  constitution  of  the  association  has  no  effect 
upon  the  mortgage  or  the  rights  and  liabilities  of  the  parties 
under  it :  that  the  mortgage  is  a  subsequent  independent 
contract  between  the  corporation  and  the  defendant,  to  be 
construed  without  reference  to  the  articles  of  the  constitution, 
which  form  no  part  of  it,  have  not  been  incorporated  into  it, 
and  can  in  no  wise  control  or  affect  it.  Some  expressions  in 
the  opinion  in  Robertson '<?  Case,  10  Md.  397,  where  a  similar 
mortgage  was  before  the  court,  apparently  give  countenance 
to  this  view ;  but  we  think  it  quite  clear,  from  the  whole 
tenor  of  that  judgment,  the  court  never  intended  to  decide 
that  in  no  case  could  the  provisions  of  the  constitution  of 
such  an  association  be  looked  to,  for  the  purpose  of  ascertain- 
ing the  relation  of  the  parties  under,  or  determining  the 
continuance  of,  the  mortgage  or  its  covenants.  In  that  case, 
the  mortgage  had  been  presented  to  the  court  below.  1>\  peti- 
tion for  a  decree  under  the  assent  clause,  and  decree  was 
passed  that  unless  a  certain  sum  was  paid  by  a  given  day.  the 
mortgaged  premises  be  sold.  The  appeal  was  from  that 
decree,  and  the  record  contained  only  the  petition,  the  mort- 
gage with  a  statement  of  the  amount  due,  verified  by  affidavit, 
and  the  decree.  The  court  first  decided  that  decree  to  be 

1  10  Md.  897.  *  40  Md.  234-236. 


424  THE   LAW    OF    UUILDIN'Q    ASSOCIATIONS.        [CH.  XVI. 

erroneous  and  reversed  it,1  .  .  .  they  decided  what  sum  the 
mortgagor  must  pay  in  order  to  prevent  a  sale  of  his  proj>- 
erty,  and  allow  the  decree  to  stand  as  a  security  for  future 
instalments  and  liabilities.  It  is  evident  that  upon  payment 
of  this  sum  ho  would  continue  a  member  of  the  association, 
and  the  covenants  of  the  mortgage  would  remain  in  force. 
The  court  then  lay  down  the  rule  for  ascertaining  what  sum 
the  mortgagee  would  be  entitled  to  receive,  in  satisfaction  of 
the  mortgage,  in  case  of  a  sale  of  the  mortgaged  property.  In 
this  connection  the  remarks  are  made  upon  which  the  defend- 
ant's counsel  relies,  viz. :  'In  ascertaining  that  sum  the  court 
cannot  look  beyond  the  mortgage  itself;  there  is  no  such 
reference  made  in  the  mortgage  to  the  rules  and  articles  of 
the  association  as  to  make  them  part  of  the  mortgage,  or  to 
authorize  the  court  to  consider  them  in  construing  the  mort- 
gage, or  ascertaining  the  amount  which  the  mortgagee  is 
entitled  to  receive  in  presenti  out  of  the  proceeds  of  sale.' 
Even  this  language  fairly  construed,  goes  no  further  than  to 
say  the  rules  and  articles  cannot  be  referred  to  for  the  pur- 
pose of  ascertaining  the  present  value  in  gross  of  the  sums 
secured  by  the  mortgage  payable  in  future,  and  does  not  for- 
bid a  reference  to  them  in  order  to  determine  when  the 
covenants  of  the  mortgage  may  cease  to  be  operative.  But  in 
the  conclusion  of  their  opinion  they  say,  '  In  construing  this 
contract  this  court  confines  itself  entirely  to  the  terms  of  the 
mortgage,  there  being  no  other  proof  in  the  cause,'  etc.  They 
are  thus  careful  to  limit  their  decision  on  this  point  to  the  case 
as  presented  by  the  record  before  them,  in  which  the  constitu- 
tion or  Articles  of  the  association  do  not  appear.  We  find 
in  that  opinion  nothing  that  is  conclusive  of  the  question 
we  are  now  considering.  Here  the  articles  of  incorporation 
and  the  constitution  and  by-laws  were  offered,  and  read 
in  evidence  by  the  plaintiff  without  objection,  and  form 
part  of  the  proof  in  the  case,  to  be  considered  by  the  court 
and  jury.  "We  are  of  opinion  they  may  be  examined  for 
the  purpose  of  examining  when  the  mortgage  contract  ter- 
minated." 

1  Because  the  court  below  could  gage,  it  being  open  for  examination 
not  determine  judicially  by  its  de-  and  proof,  either  before  sale,  or  af- 
cree  the  amount  due  on  the  mort-  ter  order  of  ratification,  nisi.  Ib. 


§  428.1  MORTGAGES.  435 

Rule  for  Ascertaining  Amount  Presently  Due  upon  Mortgage. 

§  427.  This  power  has,  indeed,  been  universally  exercised 
by  courts,  and  has  enabled  them  to  arrive  at  the  statement  of 
the  formula  in  ascertaining  the  amount,  which,  at  any  given 
time,  is  payable  upon  a  mortgage  in  order  to  satisfaction  of 
the  mortgage  sued  upon,  as  well  as  in  case  of  voluntary  re- 
demption ;  the  difference  between  the  two  appearing  to  be 
only,  that,  in  the  latter,  the  mortgagor  is  entitled  to  receive 
the  bonus,  or  share  of  profits  allowed  him  by  by-law  under 
the  statute,  upon  voluntary  repayment,  whilst,  in  the  former, 
he,  being  a  defaulter,  and  having  violated  those  very  by-laws, 
is  not  entitled  to  share  in  any  of  the  profits  held  out  to  those 
who  faithfully  observed  them.1  The  cases  in  England  and  this 
country  bearing  upon  the  question  of  the  ascertainment  of  the 
present  value  of  a  building  association  mortgage,  have  been 
examined,  at  considerable  length,  in  treating  of  the  borrowing 
member's  right  to  discharge  his  debt  previously  to  its  maturity, 
and  need  not  be  here  reviewed."  The  rule,  as  laid  down  in 
England,  requires  the  probable  or  possible  duration  of  the 
society  to  be  approximated  by  proof,  and  the  aggregate  of  all 
the  dues  stipulated  for  in  the  mortgage  to  be  calculated  as 
they  would  accrue  during  that  period ;  to  this  sum  must  be 
added  the  arrearages  and  fines  standing  against  the  mort- 
gagor, mid  the  whole  amount  thus  found  is  what  the  society 
will  be  allowed  to  receive  out  of  the  proceeds  of  the  sale.* 
In  America,  this  rule  has  been  applied  with  the  single  modi- 
fication, where  the  interest  is  lumped  with  stock-payments  as 
in  England,  that  a  just  amount  of  interest  is  to  be  rebated 
from  the  sum  total  of  the  future  installments,  so  that  the 
society  will  not  recover  interest  after  that  which  bears  inter- 
est, the  loan,  has  been  returned  to  its  hands.4 

Same  Rule  Applicable  in  Courts  of  Law  and  Equity.     Basis  of  Equity 
Jurisdiction  in  Foreclosure.     Preliminary  Account.     Decree. 

§  428.  This  rule  for  ascertaining  the  sum  due  in  satisfac- 
tion of  the  mortgage  in  case  of  sale,  holds  good,  whether  the 
suit  be  an  action  at  law  or  a  proceeding  in  equity.*  "  There  is 
no  more  difficulty  in  applying  it  in  the  one  case  than  in  the 

1  See  ante,  §  175.  4  See  ante,  §§  154-157,  and  also, 

*  See  ante,  §§  154-157.  §§  375-376. 

*  See  ante,  §§  158-164.  •  McCahan    v.    The    Columbian 


426  THE   LAW   OF   BUILDING    ASSOCIATIONS.       [cil.  XVI, 

other,  and  no  good  reason  exists  why  it  should  be  enforced  in 
the  one  and  not  in  the  other."  It  is,  therefore,  a  matter  of 
indifference,  what  course,  under  the  statutes  of  any  particular 
State,  may  be  adopted  for  the  collection  of  the  debt :  the 
method  of  computing  it  remains  the  same.  In  most  States,  it 
is  believed,  the  collection  of  the  mortgage  debt  is  through 
foreclosure  in  equity,  and  it  is  said  that  the  jurisdiction  of  a 
court  of  equity  to  decree  foreclosure  of  mortgages  "  does  not 
arise  out  of  the  power  of  sale  usually  contained  in  them,  but 
from  the  very  nature  of  the  conditional  transfer  of  the  estate 
as  security  for  the  payment  of  the  debt ;  so  that  either  of  the 
parties  has  the  right  to  apply  to  a  court  of  equity  to  fix  the 
amount  actually  due  on  the  security,  with  a  view,  on  the  one 
hand,  to  the  enforcement  of  it  in  case  of  failure  to  pay  ac- 
cording to  condition  ;  or,  on  the  other,  to  a  redemption  by  the 
payment  of  the  true  amount  found  due." "  But,  where  the 
proceedings  are  in  equity,  the  rule  as  above  laid  down  is  that 
which  governs  the  distribution  of  the  proceeds  of  sale,  and 
must  not  be  confounded  with  that  which  obtains  in  stating  the 
preliminary  account  between  the  parties,  merely  as  a  basis  for 
a  decree  of  sale.  All  that  can  be  included  in  that  account  is 
the  actual  arrears  and  charges  standing  against  the  borrower 
up  to  the  time  of  the  decree,  consisting  of  the  items  enu- 
merated in  the  mortgage,  monthly  interest,  weekly  install- 
ments, fines,  ground-rent,  taxes,  insurance  costs,  etc.,  if  any 
such  be  in  arrear,  deducting  the  credits  for  which  the  bor- 
rower claims  and  is  entitled  to  allowance  for  payments  made 
by  him."  If  he  pays  the  amount  thus  found,  the  sale  will  be 
prevented,  and  the  decree  will  stand  against  him  as  security 
for  future  payments.4  If  he  refuses  or  neglects  to  pay  them, 
the  sale  must  take  place,  the  premises  mortgaged  will  be  dis- 

Building  Association  of  East  Balti-  Ohio  St.  186;  Risk  v.  Delphos  Build- 
more  No.  2,  40  Md.  239.  ing  and  Savings  Association,  31  Id. 
1  Ib.  517.      See    also    Somerset    County 
*  Birdseye,  J.,  in  The  Franklin  Building  Loan  and  Savings  Asso- 
Building  Association  «.   Mather,  4  ciation    v.    Vandervere,     3    Stock. 
Abb.  Pr.  (N.  Y.)  274  (278).  (N.  J.)  283;  Citizens'  Mutual  Loan 
8  Robertson    v.     The    American  and  Accumulating  Fund  Associa- 
Homestead  Association,  10  Md.  397;  tion  «.  Webster,  25  Barb.  (N.  Y.) 
Hagerman  et  al.  v.  The  Ohio  Build-  263. 
ing   and    Savings   Association,   25  4  See  cases  in  preceding  note. 


§  429.]  MORTGAGES.  427 

charged  of  the  encumbrance,  and  the  rule  indicated  will  then 
come  in  to  control  the  distribution  of  the  proceeds.1 

Discharge  of  Mortgage  by  Sale  of  Property  does  not  Necessarily  Dis- 
charge Debt.     Remedy  in  Such  Case. 

§  429.  A  sheriff's  sale  on  a  mortgage  divests  its  lien  on  the 
land  covered  thereby.2  But  if  the  proceeds  of  the  sale  are 
found  insufficient  to  liquidate  the  whole  amount  appearing 
due  to  the  association,  the  debt  is  not  discharged.  It  is  said 
in  England  that  assumpsit  will  not  lie  for  the  mortgage 
money,  where  there  is  a  covenant  for  repayment.1  Where, 
however,  a  plaintiff  advanced  money  upon  the  security  of  a 
mortgage  which  contained  no  covenant  for  the  repayment  of 
the  money  advanced,  but  merely  gave  the  plaintiff  the  security 
of  the  mortgaged  premises,  it  was  held,  that  the  advance,  be- 
ing made  at  the  request  of  the  defendants,  raised  a  contract 
by  parol  for  the  repayment,  which  was  not  merged  in  the 
security  of  a  higher  nature ;  the  mortgage,  in  such  a  case,  be- 
ing in  the  nature  of  a  collateral  security.4  And  a  case  arose 
in  Maryland,  in  which  it  appeared  that  a  mortgage  had  been 
given  to  a  building  association,  conditioned  for  the  payment 
of  dues,  interest,  fines,  etc.,  and  the  stipulation  in  case  of  de- 
fault was  in  accordance  with  an  article  of  the  constitution, 
which  was  as  follows :  "  If  any  member  taking  a  loan,  shall 
fail  to  pay  his  dues  and  interest  for  three  months,  the  directors 

1  It  is  needless  to  repeat  that  there  C.  B.  (70  Engl.  C.  L.  Rep.)  561; 
is  no  substantial  difference  between  Shack  v.  Anthony,  1  M.  and  S.  573; 
the  result  attained  by  this  rule  in  and  Davis,  Law  of  Building,  etc., 
cases  where  the  mortgage  recovers  Societies,  p.  187.  Where  the  mort- 
dues,  etc.,  only,  and  the  judgment  gage  was  given  to  repay  by  monthly 
for  the  nominal  amount  of  the  mort-  installments,  upon  default  in  which 
gage  debt  where  its  payment  has  the  whole  amount  stipulated  to  be  re- 
been  reserved.  See  ante,  §§  330-  paid  should  be  payable  immediately, 
332.  the  trustees,  after  default  and 

*  See  Germania  Building  Associ-  brought  an  action  upon  the  deed  to 

ation  v.  Neill,  93  Pa.  St.  322.  recover  the  whole  of  the  difference 

s  See     Middle-ditch    v.     Ellis,     2  between  the  proceeds  of  sale  and  the 

Exch.  623;  17  L.  J.,  Ex.  365;  Ed-  amount  of  unpaid  installments  :— 

wards  v.  Bates,  13  L.  J.,  C.  P.  156;  held,  there  was  an  implied  covenant 

8  Jur.  539;  8  Scott,  N.  R.  406;  2  to  pay  the  whole  amount.     Sherriff 

D.  and  L.  299;  Matthew  r.  Black-  t.  Glenton,  28  L.  T.,  N.  S.  IM. 

more,  26  L.  J.,  Ex.  150;  1  II.  and  «  Yates  v.  Aston,  4  Q.  B.  182;  3 

N.  761.     See  also  Price  ».  Moulton.  G.  and  1).  :J31:  12  L.  J..  N.  S.,  Q. 

20  L.  J.,  C.  P.  102;  15  Jur.  228;  10  B.  160;  7  Jur.  83. 


428  THE   LAW    OF   BUILDING   ASSOCIATIONS.      [CH.  XVI. 

shall  compel  payment  by  a  sale  of  the  mortgaged  property ; 
the  proceeds  of  said  sale  to  be  applied,  lir.-r,  to  pay  ;-U  the 
expenses  of  the  sale,  arrears  of  ground-rent  and  taxas,  and 
second,  to  all  arrears  due  the  association,  and  the  balance,  if 
any,  to  the  delinquent.  Such  member  shall  then  cease  to  be 
a  member  of  the  association."  It  was  held  that  "all  arrears 
due  the  association"  included  dues,  lines,  and  also  such  sum 
a-  would  liquidate  the  installments  payable  in  future;  and  if 
the  proceeds  of  sale  were  insufficient  for  that  purpose,  an  im- 
plied assumpsit  arose  to  pay  the  balance,  upon  which  the 
building  association  might  maintain  an  action  at  law  against 
the  mortgagor  accordingly.1  Nor  will  the  purchase  of  prop- 
erty by  the  building  association,  holding  several  mortgages 
upon  the  same  property  and  against  the  same  debtor,  the 
owner,  upon  a  sale  under  the  last  mortgage,  necessarily  op- 
erate as  a  payment  or  extinguishment  of  the  debt  secured  by 
the  prior  mortgage,  where  the  sum  realized  did  not  cover  the 
whole  of  the  borrower's  indebtedness  to  the  association.3 
Such  effect  depends  upon  the  agreement  and  intention  of  the 
parties.3  In  the  absence  of  anything  to  show  that  the  land 
mortgaged  was  intended  to  be  the  only  security  (and  further 
security  was,  in  fact,  exacted  by  requiring  an  assignment  of 
the  borrower's  stock),  or  that  the  society  meant  to  give  up  any 
security  held  by  it,  the  member  has  no  right,  upon  such  show- 
ing, to  claim  his  debt  to  be  extinguished,  and  that  his  stock 
should  be  reconveyed ;  nor  does  an  attaching  creditor  take  any- 
thing in  it.4 
Terms  of  Mortgage  Preclude  Withdrawal.  Right  of  Repayment. 

§  430.  It  is  perfectly  evident  that  a  member  of  a  building 
association,  who,  upon  becoming  a  borrower,  has  not  only 
agreed  to  allow  the  society  to  appropriate,  in  indemnification 
for  its  advancement,  and  in  payment  of  the  premium  con- 
tracted for,  the  amount  calculated  to  accumulate  upon  his 
shares  by  right  of  his  faithful  continuance  of  stock-payments ; 

1  McCahan    v.     The    Columbian  8  Watts  (Pa.),  138;  Fleming  v.  Parry, 

Building  Association  of  East  Balti-  12  Har.  (Pa.)  47. 

more    No.   2,  40  Md.    237.     This  4  Germania  Building  Association 

was  an  action  in  assumpsit.  «.  Neill,  ubi  supra;  i.e.,  until  after 

s  Germania  Building  Association  the  building  association's  claim  was 

«.  Neill,  93  Pa.  St.  322.  satisfied,  or  subject  to  it.     See  post, 

8  Moore  t>.  The  Harrisburg  Bank,  §  450. 


§  430.]  MORTGAGES.  429 

but  has,  by  his  bond  and  mortgage,  obligated  himself  to  con- 
tinue these  payments  to  the  end  of  the  society's  existence, — 
cannot  be  permitted,  at  any  time  before  the  completion  of  his 
contract,  to  put  an  end  to  his  liability  to  make  stock-payments 
by  withdrawing  from  the  society.  As  an  investing  member,, 
he  has  the  privilege  of  doing  so ;  as  a  borrower,  the  very  es- 
sence of  his  undertakings  must  operate  as  a  waiver  of  that 
privilege.  This  result  is  distinctly  recognized  in  denying  the 
right  of  a  borrowing  member  to  withdraw.1  Nor  does  the 
contract  itself  contemplate  any  discharge  of  the  debt  previ- 
ously to  the  period  of  the  association's  or  series's  running 
out.2  But  this  being  an  incident  to  the  rights  of  member- 
ship,3 it  would  seem  that  a  borrowing  member  desirous  of  dis- 
charging his  obligations  to  the  building  association,  and  sever- 
ing his  connection  with  it,  could  do  so  only  by  first  paying  his 
debt  in  full  (i.e.,  paying  what,  upon  the  rule  above  laid  down, 
would  be  the  present  value,  for  purposes  of  collection,  of  his 
mortgage  at  the  very  instant  of  its  execution),  without  apply- 
ing any  of  his  stock-payments  to  it,  and  then  giving  notice  of 
withdrawal  of  his  stock.  But  this  course,  circuitous  as  it  is, 
would  put  the  borrower  to  the  inconvenience,  not  only  of  de- 
lay, but  also  of  the  necessity  of  making  a  cash  payment  to  the 
society,  in  addition  to  what  the  future  installments  might  be 
calculated  to  sum  up,  of  an  amount  equal  to  what  he  has 
already  paid  in,  and  would  have  the  right,  thereafter,  to  draw 
out.  There  is  no  reason  for  imposing  such  restrictions  upon 
the  member,  for  he  is  not  asking  the  society  for  the  payment 
of  anything,  or  putting  it  to  any  trouble  or  inconvenience, 
save  perhaps  that  of  re-investing  the  money  which  he  desires 
to  return,  and  upon  which  there  is  an  opportunity  of  making 
a  second  premium.  It  has  therefore  been  held  that  a  member 
may  discharge  the  debt  and  relinquish  his  connection  with  the 
building  association  at  once,  by  giving  it,  in  addition  to  what 
he  has  paid  in  already,  the  sum  which,  upon  the  rule  given, 
may  become  ascertained  to  be  payable  if  treated  as  presently 
due  upon  the  mortgage.4  In  so  doing,  he  must,  however,  as 

1  Ante,  §  151.  of  repayment  are  expressly  reserved 

s  Unless,  indeed,  as  is  now  done     in  the  mortgage, 
in  England,  the  privilege  and  terms        s  See  ante,  £g  152-153. 

4  See  ante,  §£  152-157. 


430  THE   LAW   OF   BUILDING   ASSOCIATIONS.      [CH.  XVI. 

in  withdrawing,  bring  himself  under,  and  conform  with  the 
requirement^  of,  the  statutory  and  by-law  provisions  govern- 
ing the  case.1  A  certain  benefit,  or  rebate,  is,  in  most  cases, 
provided  by  the  one  or  the  other.  Where  such  is  not  the  case, 
a  member  thus  repaying  to  obtain  his  discharge  from  the 
society  is  entitled  to  the  same  proportion  of  bonus  as  is  con- 
ceded to  withdrawing  members  :"  and  this  extends  to  the  de- 
duction of  redemption  moneys  paid  in  by  the  borrower.' 

Sale  upon  Mortgage,  and  Application  of  Proceeds  of  Sale  and  Value  of 
Stock  to  Debt,  Extinguish  Membership  of  Debtor. 

§  431.  A  sale  of  the  mortgaged  property,  and  application 
of  the  proceeds  and  of  the  previous  stock-payments  made  by 
the  mortgagor,  to  the  extinguishment  of  the  debt,  "  terminates 
the  membership  of  the  mortgagor  in  the  association,  and  the 
obligation  to  continue  payment  of  dues  in  consequence  of 
membership  ceases."4  But  where  the  building  association 
makes  the  whole  amount  of  the  debt  out  of  the  proceeds  of 
the  sale,  without  applying  the  borrower's  stock  interest  to  its 
extinguishment,  the  membership  is  not  terminated,  especially 
where  the  society  continues  to  receive  subscriptions  from  him 
upon  the  share  originally  advanced.6  And  there  seems  to  be 
no  reason  for  distinguishing,  in  this  respect,  between  a  case  in 
which  the  debt,  as  such,  is  made  repayable,  and  one  in  which 
dues,  etc.,  merely  are  reserved.  Payments  upon  stock  are  not 
ipso  facto  payments  upon  the  mortgage."  The  borrower  has 
the  right  so  to  apply  them,  and  in  the  absence  of  every  such 
application  by  him,  the  society  may  make  it.'  But,  if  neither 
adopt  this  method,  and  the  whole  debt,  as  it  was  in  the  begin- 
ning, undiminished  by  any  stock- payments,  be  returned  to  the 

1  Shannon  v.  The  Howard  Mu-  Robertson  v.  The  American  Home- 
tual  Building  Association  of  the  stead  Association,  10  Id.  397;  Shan- 
City  of  Baltimore,  36  Md.  383.  non  «.  The  Howard  Mutual  Build- 

*  Fleming  v.  Self,  18  J.  P.  296;  ing  Association  of  the  City  of  Balti- 

S.  C.,  23  L.  T.  Rep.  63;  Kay,  518.  more.  36  Id.  383;  Watkins  t.  The 

1  Smith  v.  Pilkington,  4  Jur.,  N.  Workingmen's  Building,  etc.,  Asso- 

S.  58;  30  L.  T.  Rep.  196;  22  J.  P.  5;  ciation,  38  Leg.  Int.  (Pa.)  333;  10  W. 

S.  C.,  on  App.,  29  L.  J.,  Ch.  227;  1  N.  C.  414;  97  Pa.  St.  514. 

De  G.,  F.  and  J.  120;  24  J.  P.  227.  •  North  America  Building  Asso- 

4  McCahan    t>.     The    Columbian  ciation  v.  Button,  35  Pa.  St.  463. 

Building  Association  of  East  Balti-  «  See  post,  §§  452-457. 

more  No.  4,  40  Md.  239;  and  see  7  See  post,  §§  453-454. 


§  432.]  MORTGAGES.  431 

society,  the  stock  remains  intact,  and  the  borrower,  continuing 
to  hold  it,  retains  his  membership.1 

Mortgage  (or  Decree  after  Preliminary  Account)  after  Payment  of 
Amount  Due  Stands  as  Security  for  Future  Membership  Duties. 
Rights  of  Mortgagee  in  Possession. 

§  432.  It  has  already  been  seen,  that,  even  after  payment 
of  the  moneys  secured  by  the  mortgage,  or  of  the  amount 
found  due  by  a  decree  of  court  as  the  basis  of  an  order  of  sale, 
the  mortgage,  in  the  one  case,  and  the  decree,  in  the  other, 
will  stand  as  a  security  for  future  payments  becoming  due 
from  the  member  as  such."  And  the  mortgage  may  also, 
in  addition  to  the  usual  reservations,  stipulate  for  the  pay- 
ment of  taxes,  insurance,  ground-rent,  and  similar  charges, 
which  thereby  become  part  of  the  debt.*  A  mortgagee  in 
possession  may  add  to  the  debt  any  sums  he  is  compelled  to 
pay  for  arrears  of  rent,  for  maintaining  the  title  of  the  estate, 
for  rebuilding  or  repairing  the  premises.4  He  must  not  com- 
mit waste,5  unless  the  security  be  defective,  when  he  may  fell 
timber  and  sell  it,  in  part  liquidation  of  the  mortgage  debt, 
and  may  open  mines.7  If  the  property  be  renewable  lease- 
hold, and  fall  in  during  the  time  the  mortgagee  is  in  possession, 
he  may  renew  and  charge  the  estate  with  the  sum  paid  for 
renewal,  with  interest  and  costs ;  even  if  he  himself  does  not 
renew,  he  will  not  be  allowed  to  release  the  right  to  do  so, 
without  the  concurrence  of  the  person  who  is  entitled  to  the 
equity  of  redemption.8  The  mortgagee  cannot,  however, 
mako  any  charge  as  receiver,  if  he  himself  has  personally  re- 
ceived the  rents,  although  there  may  be  an  express  agreement 
that  he  shall  be  entitled  to  do  so."  Nor  can  the  mortgagee 

•North  America  Building  Asso-  •  Ib. ;  cit.  Wltheriogtonv.  Banks, 

elation   «.    Sutton,    ubi  supra,  and  Sel.  C.  C.  31. 

ante,  §§  79-80.     See  also  Hennig-  *  Ib. ;  cit.  Millett  P.  Davey,  32  L. 

turaeenandWolfl,  Rec'rs, «.  Tisher,  J.,  Ch.  122;  S.  C.,  31  Beav.  470;  9 

50  Md.  583.  Jur.,  N.  8.  92;  7  L.  T.  Rep.,  N.  S. 

«  See  ante,  §§  89-90.  551 ;  11  W.  R.  176. 

»  Sec  ante,  §  332.  8  Ib. ;     cit.    O'Reilly  t».    Fcther- 

4  Davis,   Law  of  Building,  etc.,  ston,  et  al.,  4  Bligh,  N.S.,161;  S.  C., 

Societies,  p.  194.  2  Dow  and  Cl.  39. 

6  Ib. ;    cit.  Hanson  t>.   Derby,   2  » Ib. ;  cit.  Sugd.  V.  and  P.,  14tli 

Vern.  392;  Hardy  v.  Reeves,  4  Ves.  ed.,  69. 
480. 


432  THE   LAW  OF  BU1LDINU    ASSOCIATIONS.      [CH    XVI. 

claim  the  costs  of  an  attempt  to  sell  the  mortgaged  property, 
which  is  ineffectual  owing  to  a  misdescription  of  the  prem- 
ises.1 

Errors  and  Omissions  in  Mortgages. 

§  433.  It  was  held  in  Nebraska,  that,  where  a  mortgage 
purported  to  be  upon  the  fee  simple,  but  was,  in  fact  only 
upon  an  equitable  title,  it  was  not  defeated  by  a  subsequent 
purchaser  of  the  fee  simple  who  procured  from  the  holder  of 
the  equitable  title  a  quit-claim  deed.2  The  recording  of  the 
mortgage  was  notice  to  the  subsequent  purchaser,  nor  could  a 
mistake  of  the  county  clerk  in  entering  a  description  of  the 
mortgaged  premises  on  the  numerical  index,  the  mortgage  be- 
ing, in  all  other  particulars,  properly  recorded  and  indexed, 
vitiate  the  record  as  to  the  subsequent  purchasers.* 

§  434.  In  Maryland,4  the  statute  provided  that  "  in  all 
mortgages  there  may  be  inserted  a  clause  authorizing  the 
mortgagee,  or  any  other  person  to  be  named  therein,  to  sell  the 
mortgaged  premises,"  upon  the  happening  of  certain  contin- 
gencies. Under  this  act,  a  clause  in  a  mortgage  to  a  building 
association,  with  power  of  sale  to  the  building  association,  or 
its  attorney,  not  naming  him,  was  held  to  be  of  no  effect,  and 
the  power  of  sale  invalid.*  It  was  said  that  the  act  recog- 
nized the  deputation  of  authority  to  sell  to  some  person  other 
than  the  mortgagee,  but  required  that  person  to  be  named. 
Moreover,  as  the  act  evidently  contemplated  a  natural,  not  an 
artificial  person,  such  as  a  corporation  is,  the  building  associa- 
tion itself  could  not  execute  the  power,  except  only  through 
its  agent  or  attorney  named  in  the  mortgage.  A  sale,  thcre> 
fore,  by  the  attorney,  who  had  not  been  named,  was  invalid, 
and  the  building  association,  having  itself  become  the  pur- 
chaser, acquired  no  rights  under  it.6  It  was,  however,  inti- 
mated, that  if  the  property,  in  such  case,  had  been  purchased 
by  a  third  party,  paying  the  whole  or  a  part  of  the  purchase 

1  Ib. ;  cit.  French  ».  Barren,  2  s  The  Queen  City  Perpetual 

Atk.  120.  Building  Association  v.  Price,  trus- 

8  Lincoln  Building  and  Savings  tee,  53  Md.  397;  Frostburg  Mutual 

Association,  appellee,  v.  Haas  et  al.,  Building  Association  v.  Lowdermilk, 

appellants,  10  Neb.  581.  50  Id.  175.  See  also  The  Union. 

» Ib.  Hall  Ass'n  v.  Morrison,  39  Id.  281. 

4  Publ.  Gen.  L.,  Art.  64,  sec.  5.  •  See  cases  in  preceding  note. 


§  436.]  MORTGAGES.  433 

money, — if  he  be  not  restored  the  amount  so  paid,  he  would 
be  held  in  equity  to  be  equitably  entitled  as  assignee  of  the 
mortgage,  subject,  of  course,  to  the  equity  and  right  of  re- 
demption :  and  if  he  be  let  into  possession  of  the  mortgaged 
premises,  and  make  valuable  improvements  thereon,  he  would 
be  entitled  to  compensation.1 

Purchaser  Subject  to  Building  Association  Mortgage. 

§  435.  A  purchaser  subject  to  a  building  association  mort- 
gage, taking  the  forfeited  shares  of  the  defaulting  borrower, 
and  agreeing  to  pay  part  of  the  purchase  money  by  install- 
ments of  a  certain  amount,  was  subsequently  held  liable  under 
the  rules  of  the  society  (authorizing  sales  upon  such  terms)  to 
fines  for  nonpayment  of  the  installments.* 

Building  Association,  Mortgagee,  may  Exercise  all  the  Powers  given 
it  Concurrently,  Notwithstanding  its  Rules. 

§  436.  The  building  association,  being  mortgagee,  may,  if 
it  pleases,  exercise  all  the  powers  that  are  given  it,  even  con- 
currently. It  may  sue  on  the  bond  or  covenant,  or  it  may 
exercise  a  power  of  sale  given  in  the  deed,  or  it  may  foreclose.* 
And  it  seems  that  this  holds  good,  although  by  the  rules  a 
certain  course  be  prescribed.  "  In  the  case  of  a  building  so- 
ciety, a  power  of  entry,  and  to  take  and  receive  the  rents,  does 
not  bind  them  down  to  pursue  that  course  alone.  By  the  19th 
rule  of  the  Second  Borough  of  South wark  Benefit  Building 
and  Investment  Association,  it  was  provided  "That  if  any 
member,  having  executed  a  mortgage,  at  any  time  thereafter 
fail,  neglect,  or  refuse  for  six  monthly  nights  to  pay,  observe, 
and  perform  all  or  any  of  his  or  her  subscriptions,  payments, 
and  regulations,  on  his  or  her  part  respectively  to  be  paidx 
observed,  and  performed,  then  the  directors  for  the  time 
being  shall  appoint  a  person  or  persons  to  collect  the  rents 
and  profits  of  the  premises  therein  mentioned ;  but  should 
the  same  be  insufficient  to  satisfy  the  purposes  aforesaid,  or 
should  the  member  refuse  to  allow  the  person  or  persons  so 
appointed  to  collect  the  said  rents  and  profits,  or  neglect  or 

1   The     Queen    City    Perpetual  » Handley  v.    Fanner,  29  Beav. 

Building  Association,  etc.,  v.  Price,  862. 

etc.,  ubi  supra  ;  Union  Hall  Asso-  *  Davis,  Building,  etc.,  Socieuen 

elation  c.  Morrison,  ubi  supra.  p.  197. 


434  THE    LAW   OF    I5L1LD1XG    ASSOCIATIONS.      [CH.  XVI. 

refuse  to  supply  such  person  or  persons  with  sufficient  au- 
thority to  collect  the  same,  or,  if  required  by  the  directors 
(under  the  hands  of  the  trustees),  to  collect  the  same  himself 
or  herself,  and  to  pay  the  same  forthwith  to  such  person  or 
persons,  tuen  the  said  directors  shall,  without  the  concurrence 
or  consent  of  the  said  member,  absolutely  sell  and  dispose  of 
all  or  any  part  of  the  said  premises,  etc."  Upon  an  action 
being  brought  upon  the  covenant  in  the  deed  for  payment, 
this  rule  was  pleaded,  in  order  to  show  that  the  course  indi- 
cated in  such  rule  must  be  first  adopted,  to  the  exclusion  of 
an  action  at  law.  It  was  held  by  the  court,  that,  if  the  trus- 
tees of  the  society  could  maintain  an  action  upon  the  cove- 
nant at  all,  they  might  resort  either  to  that  remedy,  or  to 
the  remedy  prescribed  by  the  rule  at  their  option.1  But  in 
no  event  will  the  mortgagee  be  allowed  to  recover  more  from 
the  mortgagor  than  is  actually  due  upon  the  mortgage.* 

Tender  upon  Building  Association  Mortgage. 

§  437.  The  nature  of  a  building  association  mortgage  se- 
curing dues,  etc.,  only,  does  not  admit  of  tender,  strictly  and 
technically  speaking.  But  an  offer  of  such  terms  of  repay- 
ment as  the  borrowing  member  is  entitled  to  demand,  and  as 
will  make  a  suit  unnecessary,  amounts  to  a  tender.8  Such 
tender  of  mortgage  money  actually  due  by  a  person  having 
the  right  to  make  it,  and  refusal  to  accept,  stops  the  running 
of  interest :  a  subsequent  agreement  to  accept,  however,  starts 
the  interest  as  if  no  tender  had  been  made, — until  the  money 
is  paid  or  brought  into  court.4  A  special  tender  before  suit, 
or  with  costs  accrued  after  its  commencement,  and  refusal, 
make  the  mortgagee  liable  to  costs,  although  he  is  entitled  to 
a  decree.6  And  if  a  party  declare  beforehand,  that,  if  tender 

1  Reeves  n.  White,  16  J.  P.  115;  ingly  short;  the  form  of  the  mort- 

S.  C.,  21  L.  J.,  Q.  B.  169;  16  Jur.  gage  before  the  court,  and  the  reason. 

637;  17  Q.  B.  995.  ing  of  the  latter,  are  not  given,  and 

*  It  is  said,  in  Hamilton  Building  it  is  difficult  to  know  precisely  what 

Association,   v.   Reynolds,  5  Duer  is  meant  by  the  decision. 

(N.  Y.),  671,  that  a  mortgage  to  a  3  The  Columbian  Building  Asso- 

building  association,  in  the  usual  elation  of  East  Baltimore  No.  4  «. 

form,  is  a  valid  security  only  for  the  Crumb,  42  Md.  192. 

monthly  payments  stipulated  to  be  4  Ib. 

madf.  not  for  fines  and  other  dues.  *  Ib.     As  to  effect  of  dissolution 

Tnc  report  of  this  case  is  exceed-  of  the  building  association  upon  the 


§  439.]  MORTGAGES.  435 

I 

is  made,  it  will  not  be  accepted,  that  will  dispense  with  a 
formal  tender.1 

Taxation  of  Mortgages  held  by  Building  Associations.    Power  of  Leg- 
islature to  Remit. 

§  438.  Mortgages  given  to  building  associations  by  their 
members  are  exempt  from  taxation  only  by  virtue  of  special 
enactment.  The  General  Assembly  has  full  power  as  against 
a  public  officer  and  a  county,  which  is  its  mere  creature,  to 
release  and  remit  a  tax  levied  under  its  authority."  An  act 
of  the  Legislature,  therefore,  releasing  from  taxation  notes  and 
mortgages  given  by  members  of  building  associations  to  such 
associations  for  advances  on  stock,  and  remitting  such  taxes 
already  made  but  not  collected,  is  binding  upon  the  county,  in 
respect  of  taxes  claimed  to  be  due  it,  as  well  as  upon  the 
State's  collectors,  in  respect  of  taxes  due  to  the  State.'  But 
where  there  is  no  equity  outside  of  the  illegality  of  the  tax, 
an  injunction  will  not  lie  to  restrain  it ;  the  injury  is  not  ir- 
remediable, the  tax-payer  having  an  adequate  remedy  at  law.4 

Exemption   of  Building  Association  Mortgages  in  England  held   to 
Include  Mortgages  by  Strangers. 

§  439.  In  England  it  was  held  that  the  provisions  of  the 
statute  *  exempting  from  stamp  duties  bonds,  securities,  and 
assurances  given  on  account  of  any  friendly  society,  extended 
to  building  societies,'  and  that  the  building  association  mort- 
gage was  a  security  falling  within  the  exemption  act,7  even 
though  taken  by  the  society  before  its  rules  were  certified,8 
and  in  TJwrn  v.  Croft*  Wood,Y.-C.,  decided  that  a  mortgage 
to  the  trustees  of  a  benefit  building  society  by  a  stranger,  to 

liabilities  of  mortgagors,  members  '  Walker  v.  Giles,  18  L.J..C.  P.  323; 

of  the  society,  see  post,  §§  496-503.  13Jur.588;  6C.B.(60Engl.  C.  L.  R.) 

1  Buel  v.  Pumphrey,  2  Md.  268.  662;  13  L.  T.  Rep.  209;  Barnard  v. 

*  Selma  Building  and  Loan  Asso-  Pilswortb.  6  C.  B.  692,  n. ;  S.  C.,  18 
ciation  v.  Morgan,  57  Ala.  33.  L.  J.,  C.  P.  330,  n. ;  14  L.T.  Rep.132. 

'  Ib.  '  Ib. 

4  Ib.  8  Williams  v.  Hayward,  25  L.  J., 

*  10  Geo.  4,  C.   56,  §  37.      The  Ch.  289;  S.  C.  1  Jur.,  N.  8.  1128; 
Building  Association  Act  of  6  and  26  L.  T.  Rep.  134;  22Beav.  220;  19 
7  Will.  4,  C.  32,  §  4,  incorporates  J.  P.  788. 

all  the  clauses  and  provisions  of  the  •  36  L.  J.,  Ch.  68;  S.  C.,  81  J.  P. 
Act  of  10  Geo.  4,  so  far  as  applica-  356;  Law  Rep.,  3  Eq.  193;  15  L.  T. 
Me-  Rep.,  N.  S.  205;  15  W.  R.  54. 


43G  THE    LAW    OF   BUILDING   ASSOCIATIONS.      [<  II.    XVI. 

secure  the  repayment  of  money  advanced  to  him  out  of  the 
surplus  funds,  is  exempt  from  duty,  saying:  Walker  v.  <;il,* 
decided  that  the  37th  section  of  the  Friendly  Societies'  Act 
(10  Geo.  4,  c.  56)  was  one  of  those  which  were  incorporated 
in  the  Benefit  Building  Societies'  Act  (6  and  7  Will.  4,  c.  32). 
.Now  the  13th  section  of  the  former  Act  provided  that  the 
trustees  of  the  societies  to  which  it  related  might  invest  the 
surplus  fund  on  mortgage;  and  then  the  37th  section  di- 
rected that  no  security  given  to  such  societies  should  be 
chargeable  with  stamp  duty.  It  was  clear,  therefore,  that 
under  this  act  mortgages  to  friendly  societies  were  free  from 
stamp  duty,  and,  therefore,  by  the  latter  act,  mortgages  to 
building  societies  were  so  likewise.  These  acts  ought  to  be 
construed  liberally  in  favor  of  such  societies ;  and  it  was  rea- 
sonable enough  to  believe  that  the  Legislature  intended  to 
give  them  that  advantage  over  other  lenders  which  they 
would  derive,  by  being  able  to  go  into  the  market  and  say  to 
the  borrower,  "  If  you  borrow  of  us,  you  will  not  have  to  pay 
stamp  duty." 

Members'  Mortgages  held  by  Building  Associations,  are  not  Avail- 
able Assets  for  Purpose  of  Winding  up,  but  for  Taxation  of  its 
Personal  Property. 

§  440.  The  mortgages  which  a  building  association  holds 
against  its  members,  cannot  be  counted  as  available  assets  in 
calculating  the  amount  on  hand  required  to  pay  off  the  un- 
advanced  shares  upon  a  winding-tip.  In  such  computa- 
tions, they  must  be  set  off  against  the  shares  upon  which 
they  were  advanced,  and  both  be  excluded  from  the  reck- 
oning.1 

These  mortgages  must,  however,  be  considered  as  assets, 
"  as  synonymous  with  property," a  for  the  purposes  of  taxation. 
Thus,  in  New  Jersey,  the  property  of  building  associations  is 
assessable,  like  that  of  individuals,  at  its  full  and  actual  value.* 
An  assessment  of  the  property  of  such  a  corporation  was  made, 
based  upon  the  annual  report  of  the  company,  exhibiting  its 

1  Lister  v.  Log  Cabin  B'ld'g  Ass'n,  3  Act  March  7,  1878,  Ch.  50.  p. 

38  Md.  115.    See  also,  post,  §  492.  61.     See  above  case  (State,  etc.,  v. 

*  See  State,  Washington  Building  Hornbacker)  on  appeal,  13  Vr.  (N. 

and    Loan    Association,    pros.,    c.  J.)  635,  affirming  12  Vr.  519. 
Hornbacker,  12  Vr.  (N.  J.)  519. 


440.] 


MOKTGAGES. 


437 


financial  condition,  from  which  the  personal  estate  appeared 
to  be  $120,787.51,  after  deducting  the  value  of  the  real  es- 
tate, no  statement  of  the  taxable  property  having  been  fur- 
nished to  the  assessor,  as  required  by  law.1  It  was  contended 
that  the  building  association  was  taxable  only  for  the  amount 
yet  to  be  paid  in  by  all  the  stockholders  to  make  each  share 
worth  $200,  the  par  value,  upon  the  theory  that  the  money 
advanced  ceases  to  be  assets,  and  becomes  the  property  of 
the  stockholder,  subject  to  his  duty  to  pay  interest  and  in- 
stallments.8 The  court  below  says:  ""Whether  the  sale  of 
money  to  a  stockholder  constitutes  technically  a  loan  or  an 
advance — whether  the  bonds  or  mortgages  secured  the  repay- 
ment of  the  principal  sum,  or  a  collateral  duty — I  think  is 
immaterial  in  solving  the  present  question."  It  was  ac- 
cordingly held  that  the  building  association  was  properly 
assessed  for  the  bonds,  mortgages,  and  notes  held  by  it,  for 
the  sums  named  in  them,  and  as  aggregated  in  the  report  of 
the  secretary.  The  judgment  was  the  same  upon  appeal.4 

1  Wherefore  the  court  said,  that     the  bond  on  the  other — the  distinct 
the  corporation,  having  failed  to  ex- 
hibit, clearly  and  accurately,  to  the 

assessor  or  to  the  commissioners  of 
appeals,  the  true  particulars  of  its 
property  subject  to  taxation,  was 
not  entitled  to  relief.  State,  etc.,  t>. 
Horubacker,  13  Vr.  (N.  J.)  635. 

2  In  such  case,    the  court  says, 
nothing  would  be  taxable  to  the 
association  except  such  part  of  the 
interest,  or  such  installments  as  may 
be  owing  at  the  time  of  the  assess- 
ment; cit.  State,  Hill,  pros.,  v.  Han- 
som, 7  Vr.  50;  State,  Wickoff,  pros., 


«.  Jones,  10  Id.  650. 

3  State,     Washington     Building 
Association,  pros.,  v.  Hornbacker, 
12  Vr.  (K  J.)  519. 

4  Same  v.  Same,  13  Id.  635.      It 
was  here  said,  that  the  unsoundness 
of  the  view  that  the  obligations  did 
not  stand  good  for  their  full  face 
value,  and  hence  ought  not  to  be 
so  taxed,  arose  from  "not  observing 
the  distinct  and  separate  existence 
of  the  stock  on  the  one  hand,  and 


and  separate  relation  borne  to  the 
company  on  the  one  hand  by  its 
stockholder,  and  on  the  other  by 
its  boiTower.  .  .  .  The  stock  is  a 
collateral  security  for,  and  not  a 
credit  on  the  bond."  (See  post,  §§ 
451-454.)  There  seems,  in  this 
case,  to  be  a  mere  hint  at  a  dis- 
tinction to  be  drawn  between  the 
effect,  upon  the  question  at  hand, 
of  a  technical  redemption  of  the 
stock,  and  a  loan  to  the  member, 
which  was  the  case  here.  But, 
again,  the  distinction  appears  to 
have  been  drawn  only  for  the  pur- 
pose of  being  brushed  aside  by 
reference  to  the  fact,  that  (if  there 
•was  anything  in  it)  it  could  not  be 
applied,  because  the  method  ob- 
served in  this  association  was  dis- 
tinctly that  of  loan,  and  not  of  re- 
demption. In  substance  and  effect, 
it  has  already  been  seen,  both  are 
the  same;  ante,  §§  42-43;  354,  389. 
See  also,  as  to  taxation,  State, 
Washington  Building  Association. 


438  THE   LAW   OF   BUILDING   ASSOCIATIONS.     [CH.  XVII. 

CHAPTER  XVII. 

THE    STOCK   OF   BUILDING   ASSOCIATIONS. 

§  441.  Definition  of  stock.  Implied  condition  in  subscription.  Defi- 
ciency in  stock-subscriptions. 

§  442.  Implied  condition  in  subscription  may  be  waived.    Estoppel. 

§  443.  Increase  of  stock. 

§  444.  Property  in  shares  of  stock. 

§  445.  Transfer  and  assignment  of  shares  of  stock. 

§  447.  Restraints  upon  transfer.     Regulation  by  by-law. 

§  448.  Remedy  for  improper  refusal  to  transfer.      Measure  of  damages. 

§  450.  Lien  of  society  upon  shares  for  arrears,  etc.  Levy  on  stock 
covered  by  lien. 

§  451.  Right  of  society  to  enforce  stock-payments  by  suit.  Relation 
of  borrower's  stock-payments  to  his  debt  to  the  society. 

§  453.  Borrower's  right  to  apply  stock-payments  to  extinguishment  of 
his  debt. 

§  454.  Society's  right,  being  pledgee,  to  apply  stock  -payments  of  bor- 
rower to  extinguishment  of  his  debt.  Character  of  such 
application. 

§  455.  Value  of  stock  for  purposes  of  application  to  debt. 

§  458.  Borrower's  right  of  application  lost  by  assignment  of  shares  to 
third  party. 

§  459.  Right  of  borrower's  representative  to  apply  stock  to  debt.  Judg- 
ment creditors. 

§  460.  Marshalling  of  assets,  as  to  stock  assigned  as  collateral  and 
property  mortgaged. 

§  467.  Standing  of  judgment  creditors,  as  to  marshalling  of  assets. 

§  468.  Effect  of  rights  of  third  parties  upon  claim  for  marshalling  of 
assets. 

§  469.  Notice  of  subsisting  rights  to  compel  resort  to  one  of  two  funds. 

§  470.  Taxation  upon  capital  stock. 

Definition  of  Stock.    Implied  Condition  in  Subscription.    Deficiency 
in  Stock- Subscriptions. 

§  441.  "  The  stock  of  a  corporation  is  that  money  or  prop- 
erty which  is  put  into  a  single  corporate  fund  by  those  who, 
by  subscription  therefor,  become  members  of  the  corporate 
body." '  This  common  fund,  or  stock,  is  divided  into  equal 
parts,  having  a  separate  existence  from  one  another  in  idea 
or  abstraction  only.  These  are  the  shares,  and  they  are  fixed 

pros. ,  t>.  Creveling,  10  Vr.  (39  N.  J.         '  Folger,  J. ,  in  Burrall  v.  Bush- 
L.  R.)  465;  8.  C.  aff'd,  11  Vr.  192;     wick  R  R  Co.,  75  N.  Y.  211. 
post  §  470. 


§  44^. J          THE   STOCK    OF    BUILDING    ASSOCIATE  439 

by  legislative  enactment,  or  by  charter,  within  the  limits  set 
by  general  statutes,  as  to  number  and  value,  both  individually 
and  in  the  aggregate.  The  person  desiring  to  become  a 
member  in  the  corporation,  subscribes  for,  i.e.,  binds  himself 
to  pay  into  the  common  fund  the  sums  represented  by  each 
of  a  certain  number  of  these  shares,  not  in  excess  of  the 
allowance  ordained  by  statute  or  charter  as  the  maximum  of 
shares  to  be  lawfully  held  by  any  individual.1  The  subscrip- 
tion of  the  whole  amount  thus  ascertained  and  divided  by 
the  organic  law  of  the  corporation,  is,  in  general,  a  condition 
precedent  to  entering  upon  the  active  operations  contem- 
plated in  the  act  of  association.  It  is  presumed  that  the 
entire  amount  fixed  is  necessary  for  the  successful  prosecu- 
tion of  the  business  of  the  society.*  This  is  a  principle, 
however,  designed  only  to  protect  the  subscriber;  for,  where 
somewhat  over  three-fourths  of  the  capital  stock  provided  in 
the  charter  of  a  building  association  had  been  taken ;  all  the 
laws  for  the  creation  and  organization  of  the  corporation  had 
been  substantially  complied  with ;  and  there  was  not,  at  the 
time,  nor  at  any  subsequent  period,  any  law  requiring  a 
building  association  to  have  more  capital  stock  than  the 
amount  actually  subscribed  for  and  taken  in  ii :  it  was  held 
that  the  power  of  the  corporation  to  transact  all  the  legitimate 
business  for  which  it  was  created,  was  complete.3  But,  to 
save  the  subscriber  from  the  hardship  of  being  compelled  to 
risk  his  substance  upon  an  enterprise  rendered  precarious, 
from  the  outset,  by  a  manifest  want  of  working  capital,  an 
understanding  is  implied  in  the  contract  of  subscription  that 
he  shall  not  be  held  thereto  unless  the  full  amount  of  the 
stock  be  taken4. 

Implied  Condition  in  Subscription  may  be  Waived.     EstoppeL 

§  442.  To  that  extent,  the  subscription  may  IK>  considered 
as  conditional.     It  is  a  condition,  however,  which  may  be 

1  As  to  the  right  of  a  member  to  3  Massey  v.  The  Citizens'  Building 

hold  more  than  one  share,  where  and  Savings  Association  of  Paola, 

the  value  is  fixed  by  law,  see  ante,  22  Kas.  624.     See  also  S.  P.  in  case 

§  68,  note.  in  preceding  note. 

*  Morrison   et  al.,  Rec'rs  Chesa-  4  Morrison  et  al.,  Rec'rs,  c.Dorsey, 

peake,  etc.,  Building  Association,  v.  ubi  supra. 
Dorsey,  48  Md.  461. 


440  THE  LAW   OF   BUILDING   ASSOCIATIONS.     [CH.  XVII. 

waived  by  the  subscribers  themselves,  and  with  their  consent 
the  company  may  not  only  organize,  with  those  as  members 
who  are  willing  to  proceed  or  waive  their  objection  to  so 
doing,  but  do  all  other  things  incident  to  and  necessary  for 
the  prosecution  of  the  particular  business  for  which  it  was 
incorporated.1  This  consent  or  waiver  may  be  either  expiv-.- 
or  implied  from  the  acts  and  declarations  of  the  subscribers. 
If,  knowing  the  whole  capital  stock  had  not  been  taken,  they 
attend  the  meetings  of  the  association,  co-operate  in  the  votes 
for  the  expenditure  of  money,  for  the  purchase  of  property, 
for  the  making  of  contracts,  and  other  acts  which  could  only 
be  properly  done  upon  the  assumption  that  the  subscribers 
intended  to  proceed  with  the  stock  taken  up,  they  would  be 
estopped  thereafter  from  denying  the  proper  corporate  exist- 
ence of  the  society  because  of  the  defect  of  stock,  in  defence 
against  the  enforcement  of  obligations  incurred  by  them 
towards  it.* 

Increase  of  Stock. 

• 

§  443.  The  amount  and  value  of  the  stock  being  fixed  by 
charter,  under  a  general  statute,  it  is  competent  for  the  asso- 
ciation, by  virtue  of  authority  given  for  that  purpose  in  the 
charter,  to  increase  the  stock  within  the  limits  established  by 
the  statute,  and  in  the  manner  required  to  legalize  such 
change.  But  the  Board  of  Directors,  except  under  powers 
expressly  conferred,  can  neither  assume  to  increase  the  capi- 
tal stock,  nor  will  such  an  increase,  if  made  by  the  court  upon 
application  of  the  directors  acting  without  such  powers,  be 
valid.8 

Property  in  Shares  of  Stock. 

§  444.  A  share  is,  in  fact,  merely  a  right  to  partake  in  the 
surplus  profits  obtained  from  the  use  and  investment  of  the 
paid-in  subscriptions  and  other  revenues  of  the  association,  in 
proportion  to  the  amount  contributed  upon  it,  and  under 
such  restrictions  and  regulations  as  are  prescribed  by  statute, 
or  may  be  legally  imposed  by  charter  or  by-laws.  These 

1  Ib. ;  Hager  v.  Cleveland  and  Bas-  ubi  supra;  Cabot  and  West  Spring- 
sett,  36  Md.  476  (491).  field  Bridge  Co.  v.  Cbapin  et  al.,  6 

*  Morrison  et  al.,Rec'rs,  v.  Dorsey,  Cush.  (Mass.)  50. 

ubi  supra  ;  Massey  v.  The  Citizens'  8  See  ante,  §  200. 
Building  and  Savings  Association, 


§  444.]         THE  STOCK   OF   BUILDING   ASSOCIATIONS.  441 

profits  arise,  in  many  cases,  largely  out  of  realty ;  where  the 
funds  of  the  association  are  bound  up  in  land,  may  even,  for 
a  time,  be  almost  exclusively  represented  by  real  estate.  Yet 
the  shares  are  personal  property,  and  the  members  have  no 
interest  in  the  realty  as  such.1  At  the  same  time,  the  shares 
are  not  chattels;  they  are  rather  akin  to  choses  in  action, 
mere  evidences  of  property.  They  are  not,  at  common  law, 
capable  of  being  taken  in  execution,  and  sold  for  debts,  and, 
under  the  common  law  rules  as  to  property  of  husband  and 
wife,  if  a  woman  who  is  an  investing  member  in  a  building 
association  marry,  her  husband  (in  the  absence  of  settlement) 
will  be  entitled,  during  coverture,  to  receive  the  money  de- 
posited by  her  dum  sola"  but  if  he  die  without  having 
received  it,  the  wife  will  be  again  entitled  to  the  money,  and 
the  deceased  husband's  personal  representatives  will  have  no 
claim."  The  interest,  therefore,  which  a  member  in  a  build- 
ing association  has,  by  virtue  of  his  status  as  a  shareholder, 
and  independently  of  any  rights  of  withdrawal  and  anticipa- 
tion, is  a  subsisting  claim  to  participate,  in  a  certain  propor- 
tion, in  the  distribution  of  the  effects  of  the  association,  upon 
its  expiration  and  winding  up.  There  is  constantly  going  on, 
within  the  association,  an  ideal  process  of  setting  apart  divi- 
dends, reuniting  and  fructifying  them,  as  it  were,  until,  by 
the  aid  of  all  these  undistributed  dividends,  the  amount 
actually  paid  in  upon  each  share  has  swollen  to  the  limit 
fixed  by  the  charter  as  the  paid-up  value  thereof.  Then 
only,  when  the  functions  of  the  association  have  ceased,  to 
use  and  manage  the  fund  for  the  benefit  of  its  members,  and 
to  hold  the  legal  title  thereto  for  that  purpose;  when  the 
duties  of  the  association  have  grown  merely  ministerial,  to  be 

1  In  the  case  of  an  English  Free-  holders  more  than  an  interest  in  the 

hold  Land  Society  it  was  held  that  common  stock,  which  is  a  movable 

the  members  had  no  interest  in  the  subject,  and  not  a  joint  ownership 

land  conveyed  to  it,  and  that  shares  of    heritable    subjects.      Dove    c. 

therein  are  not  within  the  Mortmain  Young,  7  Macph.    304.     See  also, 

Acts.     Entwistle    v.     Davis,    Law  Angell   and   Ames,  Corp..  §§  567, 

Rep.,  4  Eq.  272;  36  L.  J.,  Ch.  825.  fteqq.;  Field,  Corp.,  §§  127,  stqq. 
And  in  Scotland,  the  possession  of         *  Davis,  Law  of    Building,  etc., 

shares    in    a    joint-stock  company  Societies,  p.  146;  cit.    Richards  ». 

holding  heritage,  whether  incorpo-  Richards,    2   B.    and  Ad.   453;  22 

rated  or  not,  does  not  give  the  share-  Engl.  C.  L.  R.  119. 


442  THE   LAW   OP   BUILDING   ASSOCIATIONS.   [CH.  XVII. 

the  disburser  of  the  amounts  due  on  each  share, — is  the  prop- 
erty comprehended  by  the  ideal  thing  called  a  share,  which 
is  "intangible,  and  rests  in  abstract  legal  contemplation,"1 
perfected  in  its  holder,  and  becomes  susceptible  of  tangible 
and  visible  possession,  and  legally  the  subject  of  such,  either 
actually  or  constructively.11  Realization  of  such  shares  may, 
under  certain  circumstances  and  restrictions,  be  achieved  at 
an  earlier  period  by  virtue  of  the  rights  of  withdrawal  and 
anticipation ;  *  but  it  is  partial  only,  and  rests  upon  contract 
and  compromise  between  the  society  and  the  member,  and  in 
no  manner  affects  the  real  nature  of  the  interests  of  share- 
holders as  such  in  the  society. 

Transfer  and  Assignment  of  Shares  of  Stock. 

§  445.  Like  notes  or  bills  of  exchange,  these  shares  may 
be  transferred  by  assignment  and  delivery.  For  the  protec- 
tion and  convenience  of  the  association,  the  method  and 
formalities  of  the  transfer  of  its  shares  are  either  specified  in 
the  charter  or  left  to  by-law  regulation.  In  general,  the  pro- 
vision is  made  that  the  stock  shall  be  transferable  only  upon 
the  books  of  the  corporation,  and  even  in  the  absence  of  such 
rule,  the  usual  and  proper  mode  of  assigning  corporation 
stock  is  laid  down  as  follows :  "  An  assignment  of  the  stock 
in  writing  is  made  by  the  former  owner  of  it,  with  a  power 
of  attorney  to  transfer  it  on  the  books  of  the  corporation. 
Books  of  transfer  are  kept  for  this  purpose,  and  on  the  pro- 
duction of  these  papers,  the  nominated  attorney  makes  the 
formal  transfer,  the  old  certificate  is  cancelled,  and  a  new 
certificate  is  issued  to  the  new  owner."*  The  signing  of 
powers  of  attorney  to  transfer  in  blank  has  become  a  matter 
of  usage,6  and  the  delivery  of  the  instrument  so  signed,  to- 
gether with  the  certificates  of  stock,  is  evidence  of  an  implied 
authority  to  fill  up  the  power  with  the  name  of  the  attorney  to 

1  Opinion  of  Folger,  J.,  in  Burrall  B  Kortright  v.  Bank,  20  Wend, 

e.  Bushwick  R.  R.  Co.,  ubi  supra.  (N.  Y.)  91.  See  Smith  v.  Crocker, 

*  Compare  Slaymaker  v.  Gettys-  5  Mass.  535;  Costen's  App.,  1  Har- 

burgBank.  10  Pa.  St.  373;  Gilpin  ris  (Pa.),  292;  Angell  and  Ames, 

«.  Howell,  5  Id.  57.  Corp.,  §564;  German  Union  Build- 

3  See  ante,  §§  72-74.  ing  and  Savings  Fund  Association 

4  Folger,  J.,  in  Burrall   r.  Bush-  t>.  Sendmayer,  50  Pa.  St.  67. 
wickR.  R.  Co,  75  N.  Y.  211. 


§  44C.]         THE   STOCK   OF   BUILDING   ASSOCIATIONS.  443 

make  the  transfer,1  and  the  proceeding  is  unobjectionable, 
if  there  is  a  valuable  consideration  to  support  the  contract.* 

§  446.  The  rule,  that  the  stock  shall  be  transferable  only 
on  the  books  of  the  corporation,  being  intended  merely  for 
the  security  of  the  corporation,  no  force  is  given  to  it  further 
than  to  effect  that  purpose  ;*  and  even  where  embodied  in 
the  act  of  incorporation,  it  does  not  prevent  the  title  to  shares 
from  passing  by  a  transfer  otherwise  made.4  As  between  ad- 
verse claimants  of  the  stock,  possession  of  the  certificate,  with 
the  transfer  upon  it,  is  often  the  test  of  title  ;6  a  person  to 
whom  shares  have  been  bona  fide  transferred  will,  indeed, 
hold  them  without  any  certificate.*  But,  as  the  stock-book  is 
the  evidence  of  the  relation  between  the  member  and  the  as- 
sociation,7 the  certificate  being  such  only  secondarily,  and  as 
the  corporation  itself,  when  performing  a  corporate  duty, 
springing  out  of  the  membership  relation,  and  not  dealing 
with  its  stockholder  on  the  security  of  his  stock  on  a  distinct 
contract  relation,"  need  consult  nothing  further  than  its  own 
records,  whoever  would  demand  the  privileges  of  a  stock- 
holder being  bound  to  produce  his  title,  and  ask  to  be  per- 
mitted to  participate ;  *  it  is  evident  that  an  assignment  of  the 
stock  not  entered  upon  the  books,  though  it  passes  a  perfect 
title  as  between  the  parties  to  the  assignment,  is  only  an  equi- 
table transfer,  and,  to  be  made  absolutely  available,  and  give 
the  transferee  the  privileges  of  a  recognized  stockholder,  must 
be  produced  to  the  corporation,  and  a  transfer  effected,  or,  at 
least,  demanded.10  Hence,  the  officers  of  a  building  association, 

1  German    Union    Building   and  5  Bunk  of  Commerce's  App.,  73 

Savings  Fund  Association  v.  Send-  Pa.  St.  59. 

mayer,  ubi  supra.  6  Agricultural    Bank  v.  Burr,  24 

"German    Union    Building    and  Maine,  256;  Same  v.  Wilson,  II).  -73. 

Savings  Fund  Association  v.  Send-  7  Dohinson    T.    Ilnwks.    l(i   Sim. 

mayer,  ubi  supra.  407;  12  L.  T.  Rep.  238;  39  Engl.  Ch. 

»  Angell  and  Ames,  Corp.,  §  354.  Rep.  406.    See  ante,  §  78. 

A  transfer  of  stock  not  entered  upon  8  German     Union    Building    and 

the  books  of  the  company  is  good  Savings  Fund  Association  v.  Send- 

against  all  the  world,  except  a  sub-  mayer,  50  Pa.  St.  67. 

sequent  purchaser    in    good    faith  'Field,     Corp.,    §  132,    note    3; 

without  notice.     People  v.  Elmore,  Bank    of    Commerce's    App.,    ubi 

86  Cal.  653.  mpr,t. 

4  Duke  v.  Cahawba  Nav.  Co.,  10  I0  Bank  of  Commerce's  App.  ubi 

Ala.  82.  "a pru. 


444  THE   LAW    OF   Bl  1LI»IN(,    ASSOCIATIONS.    [c'H.  XVII. 

who,  on  its  expiration,  divided  the  assets  among  those  whom 
the  books  showed  to  be  stockholders  (the  charter  and  by-laws 
providing  nothing  on  the  subject  of  transfers,  but  a  book  for 
that  purpose  being  kept  by  the  association),  were  not  held  lia- 
ble to  an  assignee  whose  assignment  was  not  entered  on  the 
books,  and  who  had  given  no  notice  thereof,  though  he  held 
the  certificates,  with  power  of  attorney  to  transfer.1  More- 
over, until  the  transfer  is  made  on  the  books  of  the  associa- 
tion, the  assignee's  title,  being  merely  an  equitable  one,  re- 
mains liable  to  every  equity  subsisting  against  the  assignor.* 
And  a  transfer  of  the  shares,  entered  upon  the  books  by  per- 
mission of  the  association,  to  a  subsequent  tonafde  purchaser 
from  the  assignor,  in  whose  name  the  stock  has  been  allowed 
to  remain  standing,  will  destroy  all  rights  and  equities  in  the 
holder  of  the  stock  certificates  to  the  stock  itself.8  Still,  the 
assignment  being,  even  before  perfection  on  the  books  of  the 
company,  indisputably  an  equitable  transfer  of  the  stock,  the 
rule  that  the  assignment  of  a  debt  due  by  a  third  person  is  a 
good  equitable  transfer  of  such  debt  as  against  a  subsequent 
attaching  creditor,  notwithstanding  no  notice  of  such  assign- 
ment is  given  to  the  debtor  until  after  the  attachment,  ren- 
ders ineffective  an  attachment  of  shares  in  a  building  associa- 
tion standing  in  the  name  of  the  debtor,  but  assigned  to  anoth- 
er party  by  transfer  on  the  back  of  the  certificate  merely.4 

Restraints  upon  Transfer.    Regulation  by  By-Law. 

§  447.  The  entry  or  record  of  the  transfer  on  the  corpo- 
ration books  is,  therefore,  a  right  which  the  l>onafide  assignee 
of  stock  may  insist  upon,  and  a  duty  which  the  association,  its 

1  Bank  of  Commerce's  App.  ribi  'Field,  Corp.,  g§  110,  132. 

supra.  4  See  Stephens  v.  Stephens,  1  Ashm. 

*  Ib.  See  also  Bayard  t>.  Farm-  (Pa.)  190.  An  attaching  creditor 
ers  and  Mechanics'  Bank,  52  Pa.  stands  in  the  shoes  of  his  debt- 
St.  232;  Bury  v.  Hartman,  4  S.  and  or,  and  any  equities  that  could 
R.  (Pa.)  175;  Brindle  v.  Mcllvain,  be  set  up  against  the  latter  are 
9  Id.  74;  Gourdon  v.  Insurance  Co.  equally  arvailable  against  the  for- 
ofN  A.,  1  Bin.  (Pa.)  430;  Wheeler  mer.  Patten  v.  Wilson,  10  Ca- 
«.  Hughes,  1  Dallas  (Pa.),  23;  War-  sey  (34  Pa.  St.),  299;  Common- 
del  t>.  Edwards,  2  Johns.  Cas.  (N.Y.)  wealth  v. Watmough,  6  Whart.  (Pa.) 
260:  James  v.  Woodruff,  10  Paige,  117,  137;  Forney's  App.,  59  Pa.  St. 
K  Y.  Ch.  Rep.  541;  S.  C.  2  Denio,  398. 
474;  Angell  and  Ames,  Corp.,  g  779. 


§  448.]          THE   STOCK    Of   BUILDING    ASSOCIATIONS.  445 

officers  and  agents  having  charge  of  the  books,  are  bound  to  per- 
form, upon  proper  demand  and  proof,  and  where  no  rights  of 
the  corporation  are  interfered  with.1  And  the  possession  of  the 
certiticate,  with  transfer  to  the  holder,  or  power  of  attorney 
executed  in  blank,  is  prima  facie  evidence  of  equitable  own- 
ership, and  renders  the  stock  transferable  ;  and  proof  of  value 
paid,  without  notice  of  any  intervening  equity,  makes  the 
holder's  title  unimpeachable.11  The  association  has  no  right 
to  restrain  the  free  exchange  of  property  by  trammelling  the 
transfer  of  its  own  shares.  It  would  seem  to  have  the  right 
to  charge  a  reasonable  fee  for  the  recording  of  the  transfer ; 
but  a  by-law  requiring  any  unreasonable  formality,  or  raising 
any  extraordinary  impediment  to  the  transfer  of  stock,  would, 
in  the  absence  of  express  legislative  authority  to  pass  it,  be 
void.3 

Remedy  for  Improper  Refusal  to  Transfer.    Measure  of  Damages. 

§  448.  If  the  transfer  of  stock,  when  duly  requested,  is 
improperly  refused  by  the  corporation,  or  its  officers  or  agents 
having  charge  of  its  books,  the  person  wronged  will  have  an 
action  on  the  case,4  or  an  action  of  assumpsit  to  recover  dam- 
ages or  dividends.6  But,  it  seems,  the  existence  of  the  legal 
remedies  precludes  the  interposition  of  the  extraordinary 
equity  powers  for  the  purpose  of  compelling  a  transfer  by 
mandamus*  except  where  the  recovery  of  damages  would  be 
an  inadequate  compensation.7  The  purchaser  of  shares  in  a 
building  association  is,  therefore,  not  entitled  to  a  mandamus 
to  compel  the  association  to  transfer  them  to  him  on  its 
books.  He  has  an  adequate  remedy  in  a  suit  for  damages.8 

1  As,  for  instance,  if  it  have   a  B  Angell  and  Ames,  t/W   tupra; 

lien  upon  it  for  unpaid  installments,  Sargent  v.  Franklin  Insurance  Co., 

fines,  etc.     But  after  payment  of  8  Pick.  (Mass.)  90. 

these  charges,  it  is  again  bound  to  6  Shipley  v.  Mechanics'  Bank,  10 

transfer.  Westoua.  Bear  River,  etc.,  Johns.  (N.  Y.)  484. 

Mining  Co.,  5  Cal.  186.  '  Cushman    v.    Thayer    Jewelry 

*  Mt.    Holly     Turnpike    Co.    v.  Manufacturing     Co.,     76    N.    Y. 
Ferree,  17  N.  J.  Eq.  117.  365. 

8  Angell  and  Ames,  Corp.,  §  567.  8  State,  Galbraith,  pros.,  t>.  Peo- 

*  Angell  and  Ames,  Corp.,  §38;  pie's  Building  and  Loan  Associa- 
Presbyterian    Church    t>.    Carlisle  tion  of    Camden,   14  Vr.   (N.   J.) 
Bank,  5  Pa.  St.  345.  389. 


446  THE   LAW   OF   BUILDING    ASSOCIATIONS.    [CH.  XVII. 

TTrless  the  particular  case  is  "  of  such  exceptional  character 
tfiut  damages  recoverable  in  a  suit  at  law  will  not  adequately 
compensate  the  relatorfor  the  loss  of  his  stock,  the  writ  must 
be  denied.  There  are  some  features  peculiar  to  these  associa- 
tions which  distinguish  them  from  other  stock  companies ; 
but  they  do  not  render  it  impracticable  to  estimate  fairly  the 
value  of  the  shares  at  any  time  so  as  to  remunerate  the 
owner  of  them  in  damages  for  their  loss,  nor  do  these  pecu- 
liarities, in  my  judgement,"  says  Van  Syckel,  J.,1  "furnish  a 
sufficient  reason  for  engrafting  an  exception  upon  a  well- 
settled  rule  of  law.  Exceptions  always,  to  some  extent, 
render  a  rule  uncertain,  and  should  not  be  favored  unless 
clearly  essential  to  the  promotion  of  justice." 

§  449.  In  an  action  at  law,  the  measure  of  damages  for 
improper  refusal  to  transfer,  is  the  actual  value  of  the  stock  at 
the  time  of  such  refusal.*  In  applying  this  rule  to  the  case  of 
building  associations,  it  was  held  that  the  plaintiff  was  entitled 
to  recover  the  amount  which  had  been  paid  as  dues  on  the 
stock  up  to  the  time  of  refusal,  with  interest  thereon  from  the 
date  of  his  several  payments.' 

Lien  of  Society  upon  Shares  for  Arrears,  etc.    Levy  on  Stock  Cov- 
ered by  Lien. 

§  450.  The  right  of  lien  upon  shares  owned  by  members 
of  building  associations  is  conferred  by  the  statutes  under 
which  they  are  incorporated,  and  extends  to  all  liabilities  of  a 
member  for  installments,  fines,  and  other  lawful  charges.  A 
provision  in  the  by-laws  prohibiting  a  transfer  of  shares,  upon 
which  and  whilst  such  a  lien  subsists  against  them,  is  analo- 

1  Ib. ;  cit.  High,  Extra-ord.  Reme-  St.   67;  North    America   Building 

dies,  §  313;  Rex  v.  Bank  of  Eng-  Association     v.     Sutton,     35     Id. 

land,  Doug.   524;   Shipley    v.  Me-  463 

chanics'  Bank,    supra ;    Kortright  3  North  America  Building  Asso- 

t.  Buffalo    Commercial    Bank,    20  ciation  «.  Sutton,  ubi  supra.    But 

Wend.  (N.  Y.)  91;  8.  C.  in  error,  where  the  stock  has  a  daily  market 

22  Id.  348.  value,  that  value,  at  the  date  of  the 

9  2  Sedgwick,  Meas.  of  Dam.  (7th  refusal,  would  probably  be  the  meas- 

ed.),  143-144;  Sargent  v.  Franklin  ure,  according  to  the  interpretation 

Insurance  Co.,  8  Pick.  (Mass.)  98;  put  upon  "net  value"  in  Babcock 

Kortright  v.  Bank,  supra.    German  et  al.  v.  The  Middlesex  Savings  Bank 

Union  Building  and  Savings  Fund  and  Building  Association,  28  Conn. 

Association  v.  Sendmayer,  50  Pa.  302. 


§  450.]  THE   STOCK    OF   BUILDING    ASSOCIATIONS.  *4  * 

gous  to  similar  provisions  in  other  corporations,  and  proper. ' 
All  other  parties  attempting  to  acquire  any  interest  in  the 
shares  thus  bound  are  postponed  to  the  claims  of  the  associa- 
tion. So,  too,  where  a  member  has  formally  pledged  his 
stock,  or  assigned  it  as  collateral  security,  to  the  association, 
his  title  to  it  is  so  far  divested  that  an  attachment  of  it  at  the 
suit  of  a  creditor  is  postponed  to  the  rights  of  the  association 
to  satisfy  its  claim  against  the  member,  to  the  extent  of  the 
debt  owing  it  from  him  out  of  the  stock,  before  the  attach- 
ment (binding  onjy  what  remains  after  the  building  associa- 
tion is  satisfied)  can  enure  to  the  benefit  of  the  attachor.' 
It  is  going  too  far,  to  say  that  the  stock  so  held  in  pledge  is 
not  the  subject  of  attachment  at  all,  and  cannot  be  sold.  "  It 
is  true,"  says  Green,  Ch.,  "  that  a  chattel  mortgage,  after  for- 
feiture in  the  hands  of  the  mortgagee,  is  not  liable  to  be  taken 
and  sold  on  execution  at  law  against  the  mortgagor,  on  the 
ground  that  the  legal  ownership  is  in  the  mortgagee.  But 
the  company  is  not  the  mortgagee  of  the  stock.  There  is,  it 
is  shown,  a  formal  transfer  of  the  shares  to  the  association  as 
collateral  security  for  the  payment  of  the  loans.  But  the 
shareholder  is  not  deprived  of  his  title  to  the  stock.  He3 
still  continues  to  be  a  member  with  all  the  rights  of  member- 
ship. He  is  by  the  constitution  regarded  as  a  stockholder. 
As  such,  he  is  required  to  pay  his  monthly  instalments  on 
each  share.  He  may  vote,  act  as  a  director,  or  other  officer, 
and,  in  fact,  do  every  act  which  stockholders  may  do,  except 
transfer  the  title  to  his  shares.  Even  that  he  may  do,  subject 
to  the  lien  of  the  association.  The  transfer  of  the  shares  to 
the  association  is  in  the  nature  of  a  pledge  rather  than  of  a 
chattel  mortgage.  The  shares  remain  the  property  of  the 

'  Field,  Corp.,  §  310,  note.  chants'  Bank  v.  Cook,  4  Pick.  (Mass.) 

9  Early  and  Lane's  App.,  89  Pa.  405;  Nesmithc.  Washington  Bank,  6 

St.  411.  Id.  824;  Quinert.  Marbli-head  Social 

3  Mechanics'  Building  and  Loan  Ins.  Co.,  10  Mass.  476;  Vansands  9. 

Association  of  New  Brunswick  v.  Middlesex  County  Bank.  26  Conn. 

Conover  et  al.,  1  McCart.  219  (not  144;  Colt  v.  Ives.  31  Id.  25;  Stevens 

disturbed  in  this  particular,  by  2  C.  «.  Hurlbut  Bank,  Ib.  146;  Middle- 

E.  Gr.  497).     See,  in  support,  Allen  town  Savings  Bank  «.  Jarvis  et  al., 

T>.  Dykers,  3  Hill  (N.  Y.),  593;  Dy-  88  Id.  372;  DeLisle  t>.  Priestman,  1 

kers  v.  Allen,  7  Id.  498;  Wilson  v.  Browne,    176;   Richards  r.    Davis, 

Little.  2  Comst.  (N.  Y.)  443;  Mer-  Am.  Law  Rep.,  June.  1859.  p.  488. 


448 


THE   LAW    OF   BUILDING    ASSOCIATIONS.    [CH. 


shareholder  for  every  purpose,  excepting  that  of  defeating 
the  lien  of  the  association.  The  shareholder  may  rxcivixj 
every  other  control  over  them.  The  principle  is  applied 
wherever  a  stockholder  pledges  his  stock  to  the  corporation  of 
which  he  is  a  member.  ...  It  is  true  that  by  the  strict  ruk'S 
of  the  common  law,  a  pledge  could  not  be  taken  in  execution 
in  the  hands  of  the  pledgee.  Neither  could  an  equity  of  re- 
demption in  land,  nor  goods  which  had  been  leased,  or  levied 
upon  by  prior  execution,  nor  bank-notes,  nor  stocks,  be  levied 
upon,  in  regard  to  which  the  strictness  of  the  ancient  rule  has 
been  greatly  relaxed  by  judicial  decisions  and  by  statute.  I 
doubt  exceedingly  whether  the  doctrine  is  applicable  to  the 
peculiar  nature  of  the  pledge.  But,  admitting  it  to  be  so,  the 
doctrine  was  designed  to  operate  in  favor  of  the  pledgee.  His 
interest,  it  is  admitted,  cannot  be  disturbed  by  the  levy.  But 
if  the  claim  of  the  pledgee  is  satisfied,  the  levy  is  good.  The 
sheriff  may  even  sell,  with  the  pledgee's  assent,  or  upon  satis- 
faction of  his  claim.  .  .  .  And  if  the  pledgee  consents,  no 
third  party  can  object."  l 


1  Mechanics'  Building  and  Loan 
Association  of  New  Brunswick  v. 
Conover  et  al.,  ubi  supra.  The 
chancellor  refers  to  Scott  v.  Scho- 
ley,  8  East.  476:  "Goods  pawned 
may  be  taken  in  execution  against 
the  pawnee  in  satisfaction  of  his 
pledge.  And  though  it  is  said, 
that,  in  the  case  of  a  lease  of  land, 
and  of  a  stock  of  cattle  for  a  year, 
they  cannot  be  taken  in  execution 
during  the  term,  that  is  because  the 
lessor  himself  could  not  have  dis- 
possessed the  tenant  during  the 
year,  and  of  course  the  lessor's 
creditor  cannot.  But,  subject  to 
the  right  of  the  pawnee  in  the  one 
case,  and  of  the  lessee  in  the  other, 
the  goods  may  be  taken."  The 
reasoning  of  the  chancellor  on  this 
branch  of  the  case  does  not  seem  to 
be  touched  by  the  ruling  of  the 
court  in  the  same  case,  nom.  Her- 
bert v.  The  Mechanics'  Building  and 
Loan  Association  of  New  Bruns- 


wick et  al.,  2  C.  E.  Gr.  497,  which 
merely  modified  the  decision  in  the 
above  case  so  as  to  do  justice  to 
other  parties  who  appeared  for  the 
purpose  of  enforcing  their  right  to 
the  marshalling  of  assets.  (See 
post.  §§  460-468.)  This  was  a  su- 
pervening equity,  whose  recogni- 
tion cannot  disturb  the  reasoning 
upon  the  question  whether  or  not 
an  execution  may  take  shares  upon 
which  the  society  has  a  lien,  or 
which  have  been  pledged  to  it,  sub- 
ject to  its  claims.  Compare,  how- 
ever, contra,  Badlam  v.  Tucker,  1 
Pick.  (Mass.)  389  (relating  to  an 
equitable  interest  in  a  vessel):  Hoi- 
brook  v.  Baker,  5  Greenl.  (Me.)  30» 
clock);  Thompson  r.  Stephens,  (10 
Maine,  27  (horse);  Lylc  r.  Barker,  5 
Binn.  (Pa.)  457  (equity  of  redemp- 
tion in  land);  Haven  v.  Low,  2  N. 
H.  13  (equity  of  redemption  in  a 
sloop  mortgaged);  Sargent  v.  Carr, 
12  Maine,  396  (creditor's  tendering. 


§  451.]          THE   STOCK    OF   BUILDING    ASSOCIATIONS.  449 

Right  of  Society  to  Enforce  Stock  Payments  by  Suit. 

§  451.  l>y  virtue  of  his  subscription  to  the  stock  of  the 
building  association,  and  the  express  and  implied  under- 
takings he  has  entered  into  with  it  in  his  original  contract  of 
membership,  the  shareholder  is  bound  to  continue  the  dis- 
charge of  his  stipulated  dues  or  stock-payments  during  the 
society's  existence,  or  until  an  end  is  put  to  the  relation  of 
membership.1  The  capital  stock  of  a  building  association 
differs  from  that  of  a  manufacturing  or  other  corporation,  in 
that,  whilst,  in  the  latter,  the  stock  is  merely  the  means  of 
accomplishing  the  objects  for  which  the  concern  was  designed, 
— in  the  former,  it  is  itself  the  end  and  aim,  upon  the 
achievement  of  which  the  entire  enterprise  is  perfected  and 
reaches  its  termination.  There  is,  on  the  other  hand,  a 
similarity  between  the  two  classes  of  corporations  in  the  fact, 
that,  in  many  of  those  having  nothing  in  common  with 
building  associations,  the  stock  is  not  all  paid  up  at  once, 
and  may,  indeed,  never  be  all  paid  by  the  subscribers,  if, 
from  the  profits  derived  upon  such  portion  as  is  paid  upon 
the  shares  at  the  outset,  sufficient  can  be  added  to  the  work- 
ing capital  to  render  its  efficiency,  over  and  above  all  loans, 
equal  to  that  originally  contemplated.  So,  in  building  as- 
sociations, where  the  stock  is  paid  up  to  its  par  value  in 
gradual  and  trifling  installments,  the  aim  of  the  management 
is,  by  investing  these  periodical  partial  payments,  to  make 
them  contribute,  in  their  turn,  to  the  common  fund,  and  to 
shorten,  as  much  as  possible,  the  time  during  which  the  in- 
stallments must  be  paid,  and  consequently  to  diminish,  to  the 
utmost,  the  aggregate  amount  or  total  percentage  payable  by 
each  shareholder  upon  every  share  subscribed.  But,  as  soon 
as  that  which  has  actually  been  paid  in  has,  by  its  own  earn- 

the  pledgee  the  amount  due  on  the         '  And  payments  of  dues,  as  well 

pledge  made  no  difference :  but  see  as  of  fines,  must  be  in  cash.     The 

Weston  v.  Bear  River,  etc.,  Mining  treasurer,  even   with   the   acquies- 

Co.,5Cal.l86,thatif  the  claims  of  the  cence  of.  the  executive  officers.  h:is 

corporation  against  the  stockholder,  no  right  to  accept  anything  <•: 

for  which  the  former  has  a  Hen  upon  he  does,  his  bondsmen  are  liable  for 

the  stock,  are  satisfied,  the  assignee  any  loss.      People's  Building   A> 

of  the  stock  may  compel  its  transfer  social  ion   ».  Wroth  et  al.,   14  Vr. 

to  him  on  the  books).  As  to  marshal-  (N.  J.)  70. 
ling  of  assets,  see  post,  §§  460-468. 


450  THE   LAW   OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

ings  and  accumulations,  grown  equal  to  the  amount  originally 
contemplated  as  the  capital  stock  of  the  building  association, 
unlike  any  other  business  corporation,  whose  prosperity  would 
then  only  be  placed  upon  a  solid  basis  for  future  operations, 
the  building  association  has  achieved  the  whole  purpose  of 
its  existence,  and  is  not  only  ready,  but  compelled  to  disband. 
Until,  however,  this  purpose  is  accomplished,  every  share- 
holder is  bound  to  continue  contributing  the  installments  pay- 
able, from  time  to  time,  upon  his  stock ;'  he  is  not  entitled  to 
special  notice  of  their  coming  due,  as  in  the  case  of  calls  upon 
the  stock  of  most  other  corporations,  but  is  bound  to  observe 
the  provisions  of  the  charter  and  by-laws  as  to  their  periodical 
recurrence.8  And  if  he  neglect  or  refuse  to  discharge  his 
obligations  in  this  particular,  he  may  be  held  therefor  by  the 
association  in  an  action  of  assumpsit*  besides  becoming 
liable  to  the  imposition  of  fines  and  forfeitures  under  the 
rules  of  the  society.4 

Relation  of  Borrower's  Stock-Payments  to  His  Debt  to  the  Society. 

§  452.  In  case  the  member,  instead  of  remaining  a  mere 
investor,  becomes  also  a  borrower  from  the  building  associ- 
ation, the  question  as  to  the  relation  between  the  payments 
made  by  him  upon  his  stock,  and  the  debt  he  owes  the  society, 
has  given  rise  to  much  confusion  in  the  decisions  of  the 
various  courts.  In  North  Carolina  it  was  said  that  the  trans- 
action must  be  treated  upon  the  basis  of  an  actual  loan  of 
money,  and  subsequent  partial  payment  therefor  by  the  bor- 
rower.6 The  same  view  was  taken  in  Pennsylvania,  pre- 
viously to  the  decision  in  North  America  Building  As- 
sociation v.  Sutton*  in  which,  for  the  first  time,  the  Su- 
preme Court  of  that  State  approached  an  understanding  of 
the  nature  of  the  dealings  between  the  building  association 
and  its  members.  Under  the  rulings  of  the  cases  proceeding 
upon  the  theory  of  partial  payments,  it  follows  that  every 

1  See  ante,  §  84.  4  See  ante,  §§  84-86. 

9  Morrison  et  al.,  Rec'rs  Chesa-  5  Overby  and  wife  v.  The  Fay- 

peake  Mutual  Land  and  Building  etteville  Building  and  Loan  Asso- 

Association,    ».    Dorsey,    48    Md.  ciation,  81  N.  C.  56;  Hoskins  v.  Me- 

461.  chanics'  Building  and  Loan  Associ- 

8  [Building]  Association  v.  Kribs,  ation,  84  Id.  838. 

7  L. -.  and  Ins.  Rep.  (Pa.)  21.  «  35  Pa.  St.  463. 


§  452.] 


THE   STOCK    OF   BUILDING    ASSOCIATIONS. 


451 


stock-payment  made  by  the  borrowing  member  is  a  pro  tanto 
reduction  of  his  mortgage  debt,1  and  must  be  defalked  there- 
from with  interest  from  the  date  of  the  payment.8  The  fal- 
lacy of  this  doctrine  is  obvious,  from  the  fact  that  the  borrow- 
er's standing  as  a  member  is  not  merged  in  his  superadded 
character  of  debtor,3  and  that,  as  a  member,  he  is  not  entitled 
to  an  account  of  profits  made  by  the  society  upon  his  contri- 
butions before  the  period  of  its  termination  (or  that  of  the 
series  to  which  his  stock  belongs),4  whilst  the  settlement  of 
his  liabilities  as  a  borrower  is  also  referred  to  the  winding  up 
of  the  mutual  scheme/  It  has,  therefore,  become  a  well- 
recognized  doctrine  that  payments  of  dues  upon  stock  are 
not  payments  to  the  mortgage  debt,  and  do  not,  ipso  facto, 
work  an  extinguishment  of  so  much  of  the  mortgage."  The 
fact  that  the  borrower  has  assigned  his  shares  to  the  society 
as  collateral  security  for  his  debt,  makes  no  difference;  for,  on 
the  one  hand,  this  is  a  recognition  of  the  distinct  standing  of 


1  Kupfert  v.  Guttenberg  Build- 
ing Association,  30  Pa.  St.  465; 
Hughes's  App.,  Ib.  471;  Philan- 
thropic Building  Association  v. 
McKnight,  35  Id.  470  (charge  of 
Hare,  J.,  p.  471);  Building  Associa- 
tion v.  Timmins,  3  Phila.  209; 
Building  Association  «.  Reid,  Ib. 
345;  Savings  Fund  v.  Murray,  14 
Leg.  Int.  133;  Columbia  Building 
Association  v.  Dobbins,  15  Id.  45; 
Building  Association  v.  Rowe,  Ib. 
See  also  Kelly  v.  Accommodation 
Saving  Fund  and  Loan  Association, 
2  Phila.  237;  Kelly  v.  Perseverance 
Building  Association,  39  Pa.  St.  148; 
Schnepfs  App.,  47  Id.  37;  Mc- 
Grath  v.  Hamilton  Building  Asso- 
ciation, 44  Id.  383. 

*  Building  Association  v.  Reid, 
8  Phila.  845. 

» See  ante,  §§  146-148. 

4  See  ante,  §§  128-129,  154-168. 

k  See  ant«,  §§  144,  154-166. 

'  North  America  Building  Asso- 
ciation v.  Sutton,  35  Pa.  St.  463 
f!68),  followed  in  Spring  Garden 


Association  v.  Tradesmen's  Loan 
Association,  46  Id.  493;  Link  t>. 
Germantown  Building  Association, 
89  Id.  15  (unincorporated);  Wat- 
kins  v.  Workingmeu's  Building  As- 
sociation, 10  W.  N.  C.  414;  38  Leg. 
Int.  333;  97  Pa.  St.  514;  Kreamer 
v.  Building  Association,  6  W.  N. 
C.  267 ;  Building  Association  v. 
Eshelbach.  7  Phila.  189;  Building 
Association  v.  Wall,  Ib.  240; 
Kingsessing  Building  Association 
v.  Roan,  9  W.  N.  C.  15;  Spring- 
ville  Building  Association  v.  Raber, 
33  Leg.  Int.  329;  24  Pittsb.  L.  J. 
23;  Selden  v.  Reliable  Savings  and 
Building  Association,  2  W.  N.  C. 
481;  32  P.  F.  Smith,  336;  Economy 
Building  Association  v.  Hunger- 
buehler,  9  W.  N.  C.  218;  Germauia 
Building  Association  v.  Neill,  93 
Pa.  St.  322;  Early  and  Lane's  App., 
89  Id.  411;  Weiss's  App.,  5  W.  N. 
C.  423.  The  same  principle  is  rec- 
ognized in  Barker  e.  Bigelow,  15 
Gray  (Mass.),  130  (137);  Delano  t». 
Wikl,  6  Allen  (Mass.),  1 ;  Mechanics' 


452  THE   LAW   OP   BUILDING    ASSOCIATIONS.    [CH.   XVII. 

the  member  as  a  member  and  as  a  debtor;1  and,  on  the  other 
hand,  it  is  a  general  doctrine  of  law,  that  payments  on  account 
of  collaterals  are  not  payments  on  account  of  the  debt  they 
secure.*  Thus,  in  a  case  which  arose  in  New  Jersey,1  it  was 
contended  that  the  mortgages  held  by  a  building  association, 
in  which  loans  were  made  to  members  upon  mortgages  with 
a  collateral  assignment  of  the  stock,  could  not  be  taxed  at 
their  full  face  value,  but  only  after  making  allowance  th- 
for  stock-payments  made.  "The  unsoundness  of  the  argu- 
ment in  support  of  this  denial,"  says  the  court,  "consists  in 
not  observing  the  distinct  and  separate  existence  of  the  stock 
on  the  one  hand,  and  the  bond  on  the  other, — the  distinct 
and  separate  relation  borne  to  the  company,  on  the  one  hand 
by  its  stockholder,  and  on  the  other  by  its  borrower.  A  con- 
nection is  sought  to  be  established  between  the  stook  held  by 
the  stockholder  and  the  bond  held  by  the  company,  by  virtue 
of  which,  as  payments  are  made  on  the  stock,  they  are  to  be 
treated  as  payments  on  the  bond,  so  that  one  steadily  merges 
in  or  becomes  offset  by  the  other.  But  while,  in  a  general 
way,  this  view  may  seem  fair,  because  an  exchange  of  the  one 
for  the  other  is  the  result  expected  to  happen,  it  is  still  not  a 
view  warranted  by  the  terms  of  the  company's  constitution, 
nor  by  the  terms  of  the  bond.  By  the  condition  of  the  bond, 
the  borrower  is  to  pay  interest  monthly,  on  the  principal 
borrowed,  at  the  rate  of  six  per  cent,  per  annum.  No  time 

Building  and  Loan  Association  of  cbanics' Building  and  Loan  Associa- 

New  Brunswick  v.  Conover,  ct  al.,  tion  v.  Conover,  1  McCart.  (N.  J.) 

1   McCart.   (N.   J.)  219  (not  over-  219. 

ruled  in  this  particular  in  2  C.  E.         2  Lord  ».  Oceau  Bank,  15  Pa  St. 

Gr.  497);  Hobokcn  Building  Asso-  386;  Kitteru's  Est.,  17  Id.  424. 
ciation  v.   Martin,  2  Beas.  (N    J.)         s  State,      Washington     Building 

428;     Somerset    County    Building  and    Loan    Association,    pros.     /. 

Loan  and    Savings  Association  v.  Hornbacker,  13  Vr.  635,  affirming 

Vandervere,  3  Stock.  (N.  J.)  282;  S.  C.,  12  Vr.  519.     And  in  Ginz  v 

State,    Washington    Building   and  Stumph  et  al.,  73  Ind.  209,  it  is  said 

Loan   Association,    pros.,  fc.  Horn-  that  an  assignment  of  stock  m  a 

bacher,  13  Vr.  (N.  J.)  635;  Hckeln-  building  association  may  be  shown 

kaemper  v.  The  German,  etc.,  As-  to  have  been  for  the  purpose  of  col- 

sociation,    22  Kas.   549.     And   see  lateral     security     merely,     though 

post,  §§  455-457.  made,  and  even  if  required  by  the 

1  Springville    Building    Associa-  rules  of  such  association  to  be  made, 

tion  v.  Raber,  33  Leg.  Int.  (Pa.)  329;  absolute  in  terms. 
24  Pittsb.  L.  J.  23.     See  also  Me- 


§  453.]          THE   STOCK   OF   BUILDING   ASSOCIATIONS.  453 

is  named  for  the  payment  of  the  principal,  because  if  the 
borrower,  in  addition  to  interest,  pays  also  the  monthly 
instalments  on  the  stock,  he  cannot  be  compelled  to  pay  the 
principal  in  cash,  but  may,  when  his  stock  becomes  paid  up} 
exchange  his  stock  for  such  principal  debt.  This  is  so  pro- 
vided in  the  condition  of  the  bond.  But  until  so  exchanged, 
they  are  distinct  in  legal  contemplation  as  well  as  in  form. 
The  stock  is  a  collateral  security  for,  and  not  a  credit  on,  the 
bond." 

Borrower's   Right   to  Apply   Stock-Payments  to  Extinguishment  oi 
His  Debt. 

§  453.  But  whilst  the  borrowing  member's  stock-pay- 
ments do  not,  of  course,  operate  to  the  pro  tanto  extinguish- 
ment of  his  debt,  it  is  his  privilege,  by  virtue  of  his 
membership,  at  any  time  so  to  apply  them ;'  and  the  society, 
holding  a  lien  upon  the  debtor's  shares  for  security  of  his 
indebtedness,  may  also,  in  case  of  his  default  to  come  up  to 
his  obligations,  use  them  to  satisfy,  so  far  as  they  will  reach, 
the  claim  it  has  upon  him.9  This  principle  is  implicitly 
recognized  in  all  the  English  decisions,  and  those  in  this 
country  ruled  upon  their  analogy,  in  which  the  borrower's 
right  to  redeem  is  conceded  upon  payment  by  him  of  the  dues 
calculated  to  become  payable  during  the  remaining  period 
of  the  association's  existence.3  His  whole  debt  consisted  of 
the  obligation  to  pay  all  the  dues  accruing  during  the  entire 
course  of  the  society's  running,  from  the  time  of  his  advance- 
ment to  that  of  final  winding  up.  Under  the  rule  established 
in  England  and  adopted  in  America,  the  payments  made  by 
him,  up  to  the  period  when  he  desires  to  redeem  his  property 
and  discharge  his  obligations  to  the  society,  are  allowed  to  be 
deducted  from  the  whole  number  of  dues,  for  the  payment  of 
which  his  mortgage  stands  as  security,  and  the  building 
association  is  permitted  to  claim  from  him  only  those  pay- 
ments, which,  upon  calculation,  shall  appear  likely  to  become 

1  Spring    Garden    Association  v.  Building  Association,  10  W.  N.  C. 

Tradesmen's  Building  Association,  (Pa.)414;  38  Log.  Int.  833;  97  Pa.St. 

46  Pa.    St.  493;  Early  and  Lane's  514:  Economy  Building  Association 

App..  89  Id.  411  ;  North  America  r.  Ilnn.ircrlmehler.  9  W.  N.  C.  218. 
Building  Association  r.   Sutton.  35         Mb. ;  cn^es  in  preceding  note. 
Id.  463;  Watkins  r   Workingim 'ii's         s  Sec  ante.  ^  154-168. 


154  THE   LAW   OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

payable  during  the  l>;il;ince  of  its  existence.  In  other  words, 
the  borrower  is  allowed  to  apply  what  he  has  thus  far  paid 
in,  i.e.,  his  stock,  to  the  extinguishment  of  his  mortgage  debt. 
His  representative,  e.g.,  his  assignee  for  benefit  of  creditors,1 
may  also  make  such  application.  By  it,  the  stock  is  relin- 
quished to  the  building  association,  forced  upon  it,*  and  its 
value  deducted  from  the  amount  of  the  debt  owing  to  it,  and 
his  membership  destroyed.*  But  he  ie  not  bound  to  take 
this  course.  He  need  not,  when  sued  upon  his  bond,  abandon 
his  interest  as  a  shareholder  to  the  society.  He  may  pay  them 
what  he  owes  and  retain  his  stock.4  Remembering  the 
duplex  character  he  sustains  in  the  association,  being  at  once 
its  debtor  for  moneys  secured  by  his  obligation,  and  its 
creditor  for  the  amount  it  holds  to  his  credit  by  reason  of  his 
payments  into  the  common  fund,  the  disposition  which  he 
may  see  fit  to  make,  so  long  as  it  violates  no  rights,  and  con- 
flicts with  no  equities  which  must  be  protected,  is  binding 
upon  the  association  under  the  general  doctrine  of  a  debtor's 
right  of  appropriation. 

Society's  Right,  being  Pledgee,  to  Apply  Stock-Payments  of  the 
Borrower  to  Extinguishment  of  His  Debt.  Character  of  Such 
Application. 

§  454:.  In  the  absence  of  such  appropriation,  however,  by 
the  owner  of  the  stock,  the  building  association,  holding  it 
under  an  assignment  as  collateral  security,  may,  by  virtue  of 
its  interest  as  pledgee,  elect  to  treat  the  payments  thereon  as 
payments  upon  the  debt  owing  by  the  member.6  But  this 
appropriation  by  the  society  must  be  prompt  and  unequivocal. 
Where  the  payments  made  by  a  borrowing  member  on  stock 
have  been  credited  to  his  general  account  with  the  building 
association,  the  testimony  of  its  officers  that  they  considered 

1  Spring    Garden   Association  v.  sociation  v.  Button,  ubl  supra;  and 

Tradesmen's  Building  Association,  ante,  §  431. 

ubi  supra.  *  Ib.;    Springvihe    Building  As- 

*  Ib. ;    North  America  Building  sociation    v.    Raber,    33    Leg.    Int. 

Association  v.   Sutton,  35  Pa.  St.  (Pa.)  329;  24  Pittsb.  L.  J.  23. 

463;     Watkins    v.    Workingmen's  6  Spring    Garden    Association  v. 

Building  Association,  10  W.  N.  C.  Tradesmen's  Building  Association, 

(Pa.)  414;  38  Leg.  Int.  333;  97  Pa.  46    Pa.   St.  493;    North  America 

St.  514.  Building  Association  v.  Sutton,  35 

8  North    America    Building  As-  Id.  463;  and  case  in  next  note. 


§  455.]          THE   STOCK    OF    BUILDING    ASSOCIATIONS.  455 

those  payments  as,  in  law,  payments  on  tlie  mortgage,  is  not 
evidence  of  an  application  to  that  purpose.1  A  fortiori,  if 
an  association,  after  full  recovery  on  a  member's  mortgage, 
receives  payments  on  account  of  installments  becoming  due 
on  such  member's  shares,  it  is  estopped  from  denying  the  ex- 
istence of  the  stock.3  And  the  receipt-book  of  the  associa- 
tion, proved  by  the  secretary  to  be  such,  containing  entries 
of  payments  made  by  a  member,  is  evidence  against  the 
building  association  without  producing  the  officer  by  whom 
they  were  countersigned.*  Nor  will  these  entries  be  rejected 
because  furnishing  evidence  of  other  payments  than  those 
only  for  which  they  are  properly  admissible.4 

Value  of  Stock  for  Purposes  of  Application  to  Debt. 

§  455.  The  value  of  the  stock  which  may  thus  be  applied 
to  the  partial  extinguishment  of  the  member's  indebted- 
ness before  maturity,  consists  merely  of  the  aggregate  of  all 
the  subscriptions  which  have  been  paid  upon  it*6  Upon 
voluntary  repayment,  there  may  be  added  to  this,  under  pro- 
visions of  statutes  and  by-laws,  a  certain  portion  of  the  profits 
of  the  society  up  to  the  time  of  repayment.6  But  defaulting 
members  can  claim  no  such  benefit.7  Disregarding,  there- 
fore, this  element  as  variable,  according  to  the  circumstances 
of  the  case,  the  rule  for  ascertaining  the  absolute  value  of  the 
stock  at  any  given  time  applicable  in  reduction  of  the  mort- 
gage debt,  is  to  find  the  total  gross  amount  of  all  the  stock- 
payments  made  by  the  member  up  to  the  time  of  default  or 
repayment,  allowing  no  interest  upon  any  of  them,8  and  the 

1  Economy  Building  Association  v.  Germantown   Building  Associa- 

v.  Hungerbuehler,  9  W.  N.  C.  (Pa.)  tion,  89  Pa.  St.  15;  McGrath  r.  Il.mi- 

218.  ilton  Building  Association,  44  Id. 

8  North   America    Building   As-  383. 

gociation  v.  Button,  85  Pa.  St.  463.  •  See  ante,  §§  154-170. 

8  Ib.  i  See  ante,  §  173,  and  post,  §156, 

4  Ib.  note. 

1  Barker     v.    Bigelow,    15  Gray  8  It   must   not  be  forgotten  tliat 

(Muss.),  130;  Watkins  r.  Working-  the  member  is  also  liable  for  his 

men's  Building  Association,  10  W.  proportionate  share  of  the  exj 

N.  0.  (Pa.)  414;  38  Leg.  Int.  333;  of  the    enterprise.      See   McGrath 

1)7  I'a.  St.  514.    See  also  Mechanics'  v.  Hamilton  Building  Association, 

Building  and  Loan  Association  v.  44  Pa.  St.  383,  and  aute,  §§  106- 

Conover,  1  McCart.(N.  J.)  219;  Link  107. 


456  THE   LAW   OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

interest  he  has  paid  upon  his  loan  standing,  of  course,  as 
interest  to  his  credit.  "  If  his  interest  has  been  punctually 
paid,  the  remaining  claim  against  him  to  be  discharged  is  the 
principal  sum  loaned.  Towards  payment  of  that,  the  mort- 
gagor may  properly  apply  the  gross  amount  of  all  sums  paid 
as  monthly  dues,  computing  the  same  as  the  amount  may  In- 
at  the  time  of  the  adjustment.  But  upon  such  payments  of 
monthly  dues  the  mortgagor  can  claim  no  interest,  nor  require 
any  application  of  them  to  be  made  as  payments  at  the  time 
when  received.  They  are  not  payments  originally  required 
or  stipulated  to  be  paid  as  payments  towards  any  loan.  They 
are  paid  as  the  capital  of  the  company,  and  paid  alike  by 
those  who  do  and  by  those  who  do  not  take  loans.  Those  who 
take  loans  may  apply  them,  on  the  final  adjustment  of  the 
loans,  to  the  discharge  of  the  loans ;  but  they  are  to  be  ap- 
plied in  a  gross  sum,  and  without  any  allowance  of  interest 
thereon.'5  * 

§  456.  S'.\ch  is  the  meaning  of  the  word  "  value,"  when  it 
is  said  that  the  borrower  has  the  right  to  apply  the  value  of 
his  stock  in  part  payment  of  the  loan ;  and  such  all  that  the 
society  need  give  him  credit  for  when  it  elects  to  treat  his 
stock-payments  as  payments  upon  his  loan.  It  is  obvious 
that  this  amount  does  not  represent  the  value  of  his  shares  in 
another  sense,  viz. ;  that  of  a  proportionate  part  of  the  total 
stock  accumulation  of  the  society  at  the  time  when  the  appli- 
cation is  made.  This  is  the  value,  which,  upon  final  settle- 
ment of  the  society's  business,  is  intended  to  be  applied  in 
cancelling  the  debt.  It  is  the  result,  primarily,  (1)  of  the 
member's  stock-payments  ;  (2)  of  his  payments  of  interest  or 
redemption  money ;  (3)  of  whatever  fines  he  has  become  liable 
to  and  has  discharged  ;  (4)  of  a  share  of  the  profits  made  upon 
all  these  payments  mingled  with  the  common  fund:  and 
secondarily,  of  a  proportionate  share  of  all  the  like  revenues 
the  society  has  had  from  other  members, — their  stock-pay- 
ments, interest,  fines,  and  other  charges,  as  well  as  from 
forfeiture  of  stock,  and  fortunate  speculations  with  and  invest- 
ments of  the  whole  corporate  fund :  and,  lastly,  of  a  pro- 
portionate share  of  the  profit  made  by  the  society  in  the  way 

1  Barker  «.  Bigelow,  15  Gray  (Mass.)  130  (137). 


§  45G.]         THE  STOCK   OF   BUILDING   ASSOCIATIONS.  45? 

of  premiums  allowed  by  all  the  borrowing  members  of  the 
association,  himself  included,  whereby  the  society  gains  the 
difference  between  the  amount  which  it  advanced  at  an  early 
stage  of  its  business,  and  that  which,  upon  its  termination,  it 
is  authorized  to  retain.  All  these  items,  when  that  period  is 
reached,  have  gone  to  swell  the  general  fund  to  such  a  in;iLr- 
nitude  that  every  share  has  actually  reached  its  maximum  at 
the  time  when  the  business  of  the  association  is  ready  to  be 
wound  up.  But  a  borrower's  claim  to  have  all  these  items 
taken  into  account,  and  to  be  given  credit  therefor,  at  any  in- 
termediate stage,  "has  no  foundation  in  law  or  equity.'"  It 
must  be  remembered  that  he  is,  in  the  first  place,  a  member, 
and  only  in  the  second  place,  a  borrower.  In  the  former  ca- 
pacity he  has  no  right  to  an  account  of  profits  except  upon 
the  termination  of  the  scheme."  And  if  the  society  by  its 
rules,  or  the  statute  by  its  equitable  mandate,  offers  to  a  with- 
drawing or  repaying  member  who  has  done  his  whole  duty 
in  the  association,  a  share  in  the  profits  of  the  concern  ;  this 
is  not  by  way  of  account,  but  of  a  fixed  bonus  whose  ascer- 
tainment requires  no  intricate  calculations ;  nor  can  one  who 
violates  the  rules  of  the  society,  and  puts  himself  outside  of 
the  protection  of  the  statute  and  the  benefit  of  the  rules, 
insist  upon  the  like  advantages.3  As  for  interest  upon  his 
several  stock-payments,  his  contract  with  the  building  associa- 
tion, upon  acceding  to  it,  never  contemplated  such  a  thing. 
No  such  stipulation,  expressed  or  implied,  ever  entered  into 
the  bargain.  All  he  was  entitled  to,  all  he  reserved  to  him- 
self the  right  to  claim,  was  a  share  of  t\\&  profits  of  the  build- 
ing association's  dealings  with  the  whole  fund  of  subscriptions. 
A  part  of  these  profits  undoubtedly  is  made  up  of  the  interest 
upon  the  investment,  from  time  to  time,  of  each  individual's 
small  installments ;  but  the  building  association,  in  settling 
with  the  members,  returns  this  to  them  in  the  shape  of  profits, 
not  of  interest  upon  the  installments.  The  building  associa- 

1  Mechanics'  Building  and  Loan  ciation,  44  Pa.  St.  383;  and  post, 

Association  of  New  Brunswick  v.  §  457. 

Conover  et  nl.,  1   McCart.  (N.  J.)  9  See  ante,  §§  128-129. 

219  (not  overruled  in  this  particular  3  Watkins       «.       Workingmen's 

in  2  C.  E.  Or.  497);   and  see  Me-  Building  Association,  10  W.  N.  C. 

Grath  v.  Hamilton  Building  Asso-  (Pa.)  414;  38  Leg.  Int.  333;  97  Pa, 


458  TTTE   LAW   OF  BUILDING   ASSOCIATIONS.    [CH.  XVII. 

tion  is  not  a  borrower  from  its  members ;  it  is  their  repository, 
their  financial  manager.1  Whatever  is  realized  from  the 
sum  total  of  its  ventures,  it  is  bound  to  account  for  in  a  bulk, 
not  by  separate  items.  The  member  nowhere  reserves  to 
himself  the  right  to  charge  the  building  association  interest 
upon  his  stock-payments.  He  has  no  such  claim  to  an  ac- 
count or  to  interest,  as  a  member,  and  it  cannot  be  assumed, 
that,  by  incurring  the  additional  obligations  towards  the 
building  association  involved  in  the  grant  of  an  advancement, 
his  previous  rights  in  respect  of  it  have  become  enlarged. 
He  continues  liable  on  his  original  undertaking.*  The  day 
for  stating  the  account  between  him  and  his  business  agent, 
the  association,  is  not  hurried.  The  whole  scheme  continues 
without  interruption,  without  modification  of  any  sort  or  in 
any  degree.  The  building  association  does  not  become  a 
borrower  from  him,  any  more  than  it  was  before,  liable  to 
pay  him  interest  upon  his  contributions  to  the  common 
fund. 

§  457.  This  question  has  recently  received  elaborate  ex- 
amination at  the  hands  of  the  Supreme  Court  in  Pennsylva- 
nia, whose  decision,  pronounced  by  Paxson,  J.,s  is  not  only 
in  strict  accordance  with  the  opinions  expressed  by  other 
courts,  and  with  the  reason  and  logic  of  the  whole  subject 
matter,  but  may  be  taken  as  definitively  conclusive  upon  the 
controversy.  The  question  being  as  to  the  value  of  the  de- 
fendant's stock,  for  the  purpose  of  application  to  the  extin- 
guishment of  his  debt  to  the  building  association,  upon  suit 
brought  against  him,  the  learned  Justice  says :  "  Its  value  for 
the  purposes  of  this  case  was  just  what  the  defendant  had 
paid  on  account  thereof.  This  was  all  ...  the  law  gave  him 
the  right  to  apply.  The  value  of  the  stock  beyond  this  con- 
sisted mainly  of  the  profits,  in  which  a  defaulting  borrower 

St.  514 ;    Matterson    t>.  Elderfield,  J  See  Delano   v.  Wild,   6  Allen 

L.  R,  4  Ch.  207;  17  W.  R.  422;  20  (Mass.),    1,    and  ante,  §§   106-107, 

L.  T.,   N.    S.  503.     See  also  Me-  146-150. 

cLanics*  Building  and  Loan  Asso-  *  In  Watkins   v.  The  "Working- 

tion  of  New  Brunswick  r.  Conover  men's  Building  and  Loan  Associa- 

et  al.,  1  McCart.  219,  and  ante,  §  175.  tion  of  Hyde  Park,  10  W.  N.  C.  414; 

1  See  Citizens'  Mutual  Loan  and  38  Leg.  Int.  333;   97  Pa.  St.  514: 

Accumulating  Fund  Association  D.  Sharswood,  C.  J.,  and  Gordon  and 

Webster,  25  Barb.  (N.  Y.)  264.  Truukey,  JJ.,  dtss. 


§  457.]          THE   STOCK    OF   BUILDING   ASSOCIATIONS.  459 

has  no  right  to  particijn.u.  This  arises  from  two  causes :  1st, 
The  peculiar  nature  of  the  contract  between  building  associa- 
tions and  their  members;  and  2d,  The  difficulty,  if  not  abso- 
lute impossibility,  of  ascertaining  the  profits  until  the  associa- 
tion is  ready  to  wind  up.  A  venture  in  building  associations 
is  a  peculiar  investment.  It  is  much  to  be  feared  that  many 
persons  of  slender  means  embark  in  such  enterprises  without 
a  clear  understanding  of  their  particular  working.  The  pres- 
ent case  furnishes  an  apt  illustration  of  the  results  in  one 
class  of  cases.  The  defendant  received  but  $384,  in  cash,  on 
his  loan ;  at  the  end  of  87  months,  a  little  over  seven  years, 
he  had  paid  into  the  treasury  the  sum  of  $794.  He  now  has 
a  judgment  against  him,  in  addition,  for  the  sum  of  $518.84r. 
This  disastrous  result  is  the  legitimate  outgrowth  of  our 
building  association  laws;  yet  it  is  not  worse  than  many  other 
ventures  in  partnership  and  other  transactions,  where  persons 
embark  in  enterprises  beyond  their  means.  The  loss  is  not 
necessarily  the  fault  or  result  of  the  law,  but  of  the  inability 
of  the  defendant  to  keep  his  contract  with  the  association. 
Such  investments  are  profitable  or  otherwise,  according  to 
circumstances.  Where  the  association  is  prudently  managed, 
and  is  wound  up  within  the  prescribed  period,  it  is  always 
profitable  to  the  non-borrowing  members.  They  participate 
in  the  premium  which  they  do  not  pay.  If  the  association 
was  composed  exclusively  of  non-borrowers,  there  would  be 
no  profits ;  if,  on  the  other  hand,  it  was  composed  exclusively 
of  borrowers,  the  gain  of  the  individual  member  would  de- 
pend upon  the  amount  of  his  premium ;  if  he  had  paid  less 
than  the  average,  there  would  be  a  profit ;  if  he  had  paid 
more,  there  would  be  a  loss.  Where  the  association  is  com- 
posed of  both  classes  of  members,  the  result  to  the  borrowing 
member  must  depend,  to  a  great  extent,  upon  the  relative 
proportion  of  the  two  classes,  and  upon  the  amount  of  pre- 
miums which  he  had  paid.  There  are,  of  course,  other  mat- 
ters which  in  a  minor  degree  affect  the  result ;  but  the  fore- 
going are  the  two  cardinal  principles  which  underlie  the  whole 
matter;  and  it  is  further  to  be  observed,  that  the  profits  are 
reserved  for  those  members  who  continue  to  the  end.  For 
borrowing  members  who  drop  out  by  the  way,  there  is  noth- 
ing but  disaster.  The  defendant  dropped  out  by  the  way. 


460  THE   LAW   OF   BUILDING    ASSOCIATIONS.    [CH.  XVII. 

There  is  nothing  in  the  character  of  the  association,  or  in  his 
contract,  to  entitle  him,  at  this  stage,  to  a  share  of  the  profits. 
The  law  provides  but  for  one  such  case,  and  that  is  a  with- 
drawing member.  .  .  ,  The  defendant  was  not  a  withdraw- 
ing stockholder,  nor  could  he  have  been,  so  long  as  his  stock 
was  held  in  pledge.  lie  is  not  entitled  to  the  rights  which 
the  law  confers  upon  such  stockholders,  yet  his  claim  far  ex- 
ceeds what  the  Act  of  Assembly '  gives  to  them.  With- 
drawing stockholders  can  only  claim  of  the  profits  such  pro- 
portion as  may  be  fixed  by  by-laws.  Such  proportion  might 
readily  be  fixed  by  a  by-law  so  as  not  to  work  injustice  to 
remaining  stockholders.  At  most  it  would  be  an  approxima- 
tion. Here  the  defendant  claims  an  absolute  right  to  par- 
ticipate in  the  entire  profits  up  to  the  time  of  the  trial  of  his 
case ;  such  right  is  nowhere  to  be  found,  and  if  it  existed,  how 
can  it  be  ascertained  with  accuracy  at  this  stage  of  the  asso- 
ciation's business  ?  Its  assets  consist  chiefly  of  judgments  for 
money  loaned,  including  some  houses  which  were  evidently 
bought  in  upon  executions.  The  exact  value  of  the  houses 
can  be  ascertained  only  by  a  sale,  and  the  judgments  are 
worth  only  what  can  be  realized  therefrom ;  as  such  loans  are 
made  usually  upon  small  margins,  they  cannot  be  regarded  as 
securities  having  a  fixed  value.  In  view  of  the  facts  shown 
by  the  evidence,  that  a  large  number  of  members  had  ceased 
paying  up  their  dues  by  reason  of  a  supposed  defect  in  the 
charter  of  the  association,  the  difficulties  of  realizing  the  face 
of  the  judgments  may  be  readily  appreciated.  The  ascer- 
tainment of  the  real  value  of  the  stock  can  only  be  arrived  at 
by  closing  up  the  affairs  of  the  corporation.  This  the  de- 
fendant has  no  right  to  demand.  If,  as  was  contended,  he 
was  entitled  to  it  in  this  proceeding,  the  most  that  could  be 
done  would  be  to  approximate  it.  The  jury,  and  even  the 
officers  of  the  company,  might  place  a  much  higher  value 
upon  its  securities  than  could  be  realized  therefrom.  In  such 
case  the  defaulting  member  would  receive  more  than  the 
members  who  paid  up  to  the  end ;  besides,  the  profits  are 
composed  chiefly  of  the  premiums ;  they  are  made  up  in  part 
of  the  premium  which  the  defendant  agreed  to  pay.  I  say 

1  Act  of  1859. 


§458.]          THE    STOCK    OF    BUILDING    ASSOCIATIONS.  46] 

agreed  to  pay,  for  it  is  a  mistake  to  suppose,  as  was  claimed 
by  the  defendant,  that  he  has  paid  the  premium.  He  only 
promised  to  pay  it.  It  was  inserted  in  the  judgment  note, 
and  is  now  being  collected.  The  building  association  law  ex- 
pressly authorizes  the  plaintiff  to  recover  the  premium  from 
a  defaulting  borrower,  yet  the  defendant's  proposition,  if  sus- 
tained, would  defeat  his  right  in  part.  We  are  of  opinion  that 
the  right  to  apply  the  stock  in  such  cases  as  this,  means  only 
the  right  to  apply  the  payments  made  thereon."  ' 

Borrower's   Right   of  Application   Lost   by  Assignment  of  Shares   to 
Third  Pai "ty. 

§  458.  But  the  member's  right  to  claim  credit  even  for 
such  value  of  his  stock,  when  sued  by  the  building  associa- 
tion for  his  loan,  is  lost,  if  he  has  assigned  his  shares  to  a 
third  party.2  By  so  doing,  he  has  made  a  definite  appropri- 
ation of  the  value  of  the  stock.  He  cannot  afterwards  assume 
to  re-appropriate  it  in  violation  of  that  already  consummated 
arrangement.3  And  where  a  member  assigned  all  his  shares 
as  collateral  upon  a  loan  from  the  building  association  ;  and, 
on  obtaining  from  it  a  second  loan,  made  a  second  assignment 
of  the  same  stock  as  collateral ;  it  was  held,  that  he  could  not 
subsequently  apply  the  payments  made  on  the  stock  to  the 
first  loan,  which  had  also  been  secured  by  judgment,  if,  before 
obtaining  the  second  loan,  he  had  made  no  such  appropria- 
tion of  them.4  The  first  assignment,  as  collateral,  was  not  a 
discharge  of  the  loan  to  the  extent  of  the  installments  paid, 
and  the  second  was  an  election  by  the  debtor  not  to  treat  the 
first  assignment  as  a  partial  payment  of  the  first  debt,  but  to 
pledge  all  the  stock  as  a  living  security  for  the  payment  of 
the  second.  It  was,  therefore,  said,  that  the  payments  on  the 
stock  should  be  applied  to  the  second  debt,  and  not  to 
the  first,  against  the  consent  of  the  association,  except  to  the 
extent  of  what  might  remain  after  the  second  was  satisfied. 
This  was  said  not  to  be  a  case  of  a  debt  or  owing  two 
debts,  of  which  neither  he  nor  his  creditor  has  made  any 

1  And  it  is  added  that  such  only  ing  Fund  and  Loan  Association,  35 

is   the   effect   of   the    decision  in  Pa.  St.  223. 

Early  and  Lane's  App.,  89  Pa.  St.  *  Ib. 

411.  « Philadelphia    Mercantile    Loan 

9  Schober  v.  Accommodation  Sav-  Ass'n  c.  Moore,  47  Pa.  St.  238. 


462  THE   LA  V   OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 


application,  and  which  the  law  will,  therefore,  apply.  It 
In  reliance  upon  the  second  assignment  that  the  second  loan 
was  made.  Had  the  debtor  after  the  first,  and  before  the 
second  loan,  made  an  assignment  of  the  stock  to  a  third  party, 
he  could  not  have  claimed  credit  for  its  value  on  the  first 
debt.1  This  second  assignment  operated  analogously  ;  the 
assignment  of  the  stock  to  a  third  party  would  have  been 
a  new  appropriation,  divesting  him  of  the  right  to  appropriate 
to  the  debt  owing  to  the  building  association.  The  second 
assignment  to  the  building  association  itself  was  likewise  a 
new  appropriation  drawing  after  it  the  loss  of  the  same  right, 
for  the  same  reason." 

Right  of  Borrower's   Representative  or    Surety    to  Apply   Stock   to 
Debt.    Judgment  Creditors. 

§  459.  The  doctrine  that  payments  on  the  stock  are  not, 
ipso  facto,  payments  to  the  mortgage,  but  that  either  of  the 
parties  may  so  apply  them,  precludes  any  mere  outsider  from 
either  claiming  such  application,  or  interfering  with  it,  to  his 
own  advantage.  The  debtor's  representative,  e.g.,  his  assignee 
for  benefit  of  creditors,*  executor,  etc.,  may  exercise  the  same 
rights  in  the  premises,  which  the  debtor  himself  would  have  had. 
And  it  is  said  that  where  a  member  borrows  money  from  the 
association,  and  gives  a  joint  note  of  himself  and  another  per- 
son, the  real  estate  of  the  latter  being  mortgaged  as  security 
for  the  advance,  and  the  borrower's  stock  being  assigned  to 
the  association  as  additional  security;  this  third  party  has  the 
right,  when  sued  for  the  debt,  to  have  the  stock  assigned  first 
sold  for  the  debt.4  A  claim,  on  the  part  of  the  society,  that 
the  share  is  forfeited  to  it,  and  that  no  credit  should  be  given 
for  it,  is  inequitable  and  cannot  be  allowed.  The  share  must 
be  sold,  either  subject  to  all  dues  which  have  accrued  against 
it  since  the  trial  of  the  case;  or  freed  from  all  dues  accrued 
prior  to  the  sale  :  in  the  latter  case,  the  dues  accrued  since  the 
trial,  and  before  the  sale,  to  be  first  paid  out  of  the  proceeds.* 

1  Schobere.  Accommodation  Sav-  8  See  Spring  Garden  Association 

ing  Fund  and  Loan  Association,  35  v.  Tradesmen's  Loan  Association, 

Pa.  St.  223.  46  Pa.  St.  493. 

*  Philadelphia  Mercantile  Loan  4  Masseya.  Citizens'  Building,  etc., 

Association  v.  Moore,  47  Id.  233.  Association,  22  Kas.  624.  *  Ib. 


§  460.]  THE   STOCK   OF  BUILDING   ASSOCIATIONS.  463 

On  the  other  hand,  where  the  stock  has  been  assigned  to  the 
building  association  as  collateral  security,  the  title  to  the  stock 
has  so  far  passed  from  its  owner,  that  a  subsequent  purchaser 
of  the  same  stock  cannot  prevent  the  building  association 
from  applying  the  sums  paid  thereon  in  extinguishment  of  the 
borrowing  member's  debt.  Thus,  S.,  the  holder  of  shares  in 
a  building  association,  procured  a  loan  from  it,  giving  a  judg- 
ment upon  his  real  estate,  and  pledging  his  shares  as  collat- 
eral, lie  afterwards  assigned  the  stock  to  G.  The  real  estate 
belonging  to  S.  was  subsequently  sold  under  a  lien  junior  to 
said  judgment,  and  the  money  brought  into  court  for  distribu- 
tion. The  building  association  directed  the  sums  paid  on  the 
stock  to  be  applied  in  payment  of  the  original  loan  to  S.  G. 
appeared  before  the  auditor,  and  claimed  that  the  judgment 
held  by  the  building  association  should  be  paid  in  full  out  of 
the  proceeds  of  the  sale  of  S.'s  real  estate.  But  it  was  held 
that  he  had  no  standing  to  make  such  a  demand.1 

Marshalling  of  Assets  as  to  Stock  Assigned  as  Collateral  and  Prop- 
erty Mortgaged. 

§  460.  But  the  doctrine  does  not  extend  to  denying  the 
right  in  equity  of  a  junior  mortgagee  to  compel  the  building 
association,  being  the  first  mortgagee,  and  also  holding,  by 
assignment  as  collateral  security,  the  stock  of  the  borrower  in 
its  hands,  to  resort  first  to  the  latter  on  which  it  has  a  sole  lien 
in  satisfaction  of  the  debt,  before  asserting  its  right  upon  the 
land  on  which  it  holds  a  lien  in  common  with  the  second 
mortgagee,  but  anterior  to  him  in  point  of  time.  Where  this 
state  of  facts  obtains,  "it  is  quite  certain"  that  the  second 
mortgagee  "  has  the  right  in  equity  to  require  the  first  mort- 
gagee (building  association)  to  look,  primarily,  to  the  stock 
in  question." a  It  must,  at  the  instance  of  the  second  mortga- 

1  Weiss's  App.,  5  W.  N.  C.  (Pa.)  whose  shares  were  redeemed,  and 

423.  who  executed  a  trust  deed  upon  hi» 

*  Herbert  v.  The  Mechanics'  property  to  secure  payment  of  dues, 
Building  and  Loan  Association  et  etc. ;  then  gives  another  deed  to  se- 
al., 2  C.  E.  Gr.  (N.  J.)  497,  overrul-  cure  a  debt  to  another  party  upon 
ing,  on  this  point,  the  same  case,  the  same  property ;  upon  his  default 
nom.  The  Mechanics'  Building  and  in  paying  dues  and  interest,  and  sale 
Loan  Association  of  New  Bruns-  of  the  property  by  the  building  as- 
wick  v.  Conover  et  al.,  1  McCart.  sociation,  the  debtor  and  other  credi- 
(X  J.j  219.  In  Virginia,  where  one  tor  may  elect  to  have  tL?  proceeds 


464  THE   LAW  OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

gee,  be  sold,  and  the  proceeds  applied  to  the  mortgage  before 
recourse  can  be  had  to  the  land.1  Nor  will  this  equity  be 
defeated  by  a  levy  upon  the  stock  under  a  judgment  against 
the  mortgagor.*  The  right  of  the  creditor  to  marshal  the 
assets  of  the  debtor  is  absolute  against  the  debtor  himself,  and 
cannot  be  taken  away  by  the  subsequent  action  of  other 
creditors.8 

§  461.  This  acceptation  of  the  law  rests  upon  the  ground 
of  the  equity  doctrine  of  marshalling  of  assets.  "  The 
general  principle  is,  that,  if  one  party  has  a  lien  on,  or  inter- 
est in,  two  funds,  for  a  debt,  and  another  party  has  a  lien  on, 
or  interest  in,  one  only  of  the  funds,  for  another  debt,  the 
latter  has  a  right  in  equity  to  compel  the  former  to  resort  to 
the  other  fund,  in  the  first  instance,  for  satisfaction,  if  that 
course  is  necessary  for  the  satisfaction  of  the  claims  of  both 
parties,  whenever  it  will  not  trench  upon  the  rights,  or  operate 
to  the  prejudice,  of  the  party  entitled  to  the  double  fund."  4 
"  If  A.  for  example,  holds  a  first  mortgage  against  two  parcels 
of  real  estate,  and  B.  is  the  owner  of  a  subsequent  mortgage 
against  only  one  of  these  parcels,  natural  justice  would  seem 
to  require  that  A.  should  not  resort,  in  the  first  instance,  to  the 
parcel  covered  by  B.'s  mortgage,  but  should  endeavor  to 
collect  his  debt  from  the  lot  charged  with  his  encumbrance 
alone,  and  resort  to  the  portion  covered  by  B's  mortgage  only 
for  the  purpose  of  making  up  any  deficiency.  Justice  further 
requires,  that,  if  A.  does  resort,  in  the  first  place,  to  the  par- 
cel covered  by  B.'s  mortgage,  the  latter,  thus  disappointed  in 
his  security,  shall  be  subrogated  to  A.'s  rights  as  against  the 
other  parcel ;  and  in  this  way,  while  sufficient  play  is  given  to 

of  sale  invested,  and  the    unpaid  Reillyt.  Mayor  etal.,  1  Beas  (N.  J.) 

monthly    dues    and    interest    paid  55;  Washington  Building  and  Loan 

monthly  out  of  the  interest  and  as  Association  v.  Beaghen  et  ah,  12  C. 

much  of  the  principal  as  may  be  E.  Gr.  (N.  J.)  99. 

necessary,  or  to  have  the  present  *  Philippsburg  Mutual  Loan  and 

value  of  these  monthly  dues  and  in-  Building  Association  v.  Hawketah, 

terest  ascertained,  on  the  principle  12  C.  E.  Gr.  (N.  J.)  355. 

of  annuities,  and  paid  out  of  the  8  Herbert    v.    The     Mechanics' 

proceeds  of  sale  to  the  building  as-  Building  and  Loan  Association  of 

sociation.  Winchester  Build'g  Ass'n  New  Brunswick  et  ah,  2  C.  E.  Gr. 

«.  Gilbert  et  ah,  23  Grattan,  787.  (N.  J.)  497. 

1  Red  Bank  Association  v.  Pat-  *  1  Story,  Eq.  Jur.   §  638.    Ex 

tereon,  12  C.  E.  Gr.  (N.  J.)  223;  parte  Kendall.  17  Ves.  514. 


§  461.]         THE   STOCK    OF   BUILDING   ASSOCIATIONS.  465 

the  rights  of  one  party,  protection  is,  at  the  same  time,  af- 
forded to  the  rights  of  others."  '  It  is,  indeed,  in  most  cases, 
practically  immaterial  which  of  the  two  methods  the  court,  in 
its  discretion,  may  adopt.  Both  operate  essentially  to  the 
same  end,  viz.;  that  a  person  who  can  resort  to  two  funds, 
shall  not,  by  his  option,  disappoint  another  who  has  a  claim 
on  one  only.8  It  is  not  without  reason,  that  courts  have  pre- 
ferred the  latter  method  (by  subrogation),  thus  giving  the 
first  encumbrancer  on  both  funds  the  option  to  proceed  on  the 
one  or  the  other ;  and  if  he  elect  the  one  upon  which  the 
second  encumbrancer  relies  also,  then  substituting,  or  subrogat- 
ing  him  in  the  other's  place  as  to  the  remaining  fund  bound 
by  his  lien.  The  equities  of  both  to  make  their  claims  out  of 
the  property  of  the  debtor  are  equal,  and  prior  in  tempore 
potior  in  jure,  is  the  principle  which  governs  in  such  cases. 
At  the  same  time,  while  giving  him  ample  latitude  to  use  his 
preference,  the  right  of  subrogation  effectually  cures  and  pre- 
vents the  infringement  of  that  other  rule  of  law  and  good 
morals  alike,  sic  utere  tuo  ut  alienum  non  laedas.  It  has, 
therefore,  been  settled  in  Pennsylvania,  that  the  courts  will 
not  enjoin  the  first  creditor  from  proceeding  against  the 
doubly  encumbered  fund ;  but  that  the  rights  of  the  second 
creditor  will  be  secured  by  subrogation.8  Nor  can  it  make 
any  real  difference,  whether  both  funds  consist  of  real  estate, 
or  whether  the  one  fund  only  be  such,  and  the  other,  say,  stock 
pledged  as  collateral.  The  principle,  the  "natural  justice" 
of  the  thing,  is  broad  enough  to  eover  both  cases,  and  it  has 
been  unquestioningly  applied,  where  both  were  involved,  by 
courts  whose  opinions  are  entitled  to  the  highest  respect.4 

1  Bispham,  Eq.,  §  340.  aside  the  execution.  Evans  v.  Thi- 
9  Ramsey's  A  pp.,  2  Watts  (Pa.),  bault,  2  Miles  (Pa.),  251. 
228;  Hastings'  Case,  10  Watts,  803;  8  Ramsey's  App.,  2  Watts,  228; 
Lloyd  v.  Galbraith,  32  Pa.  St.  103;  Hastings'  case,  10  Id.,  303;  Lloyd 
U.  8.  Insurance  Co.  v.  Shriveretal.,  v.  Galbraith,  32  Pa.  St.  103;  Neffs 
3  Md.  Ch.  Dec.  381.  The  equity  App.,  2  Watts  and  Serg.  36;  Shunk's 
to  control  the  order  in  which  several  App.,  2  Pa.  St.  304;  McDevltt  and 
properties  shall  be  sold  to  satisfy  a  Kay's  App.,  70  Id.  373.  See,  how- 
common  encumbrance  is  one  against  ever,  Kelly  t>.  Accommodation  Sav- 
tfie  execution,  not  against  the  judg-  ings  Fund,  2  Philn.  237. 
ment.  McCormick's  App.,  57  Pa.  *  See  Ramsey's  App.,  2  Watts, 
St.  54.  But  the  court  will  not  en-  228;  Ferris  r.  Crawford,  2  Donio 
tertaia  it  upon  a  motion  to  set  (N.  Y.},  595;  Herbert  r.  The  Me- 


466  THE   LAW   OF   BUILDING   ASSOCIATIONS.    [CH.   XVII. 

§  462.  There  is,  however,  a  class  of  cases  decided  in  Penn- 
sylvania, in  which  the  right  of  applying  the  stock-payments 
upon  the  borrower's  stock  held  as  collateral  by  the  building 
association,  to  the  extinguishment  of -the  debt  also  secured  by 
mortgage  in  favor  of  the  same,  seems  to  be  confined  to  the 
original  parties  to  the  transaction,  the  borrower  and  the 
society ;  and  in  which  the  right  of  any  third  party,  no  matter 
what  may  be  his  equities,  to  compel  the  society  so  to  apply 
said  stock-payments,  seems  to  be  denied  in  toto.  The  decision 
of  Strong,  J.,  in  North  America  Building  Association  v. 
Sutton '  first  recognized  the  fact,  that  payments  upon  stock 
were  not,  ipso  facto,  payments  upon  the  mortgage  debt,  but 
might  be  so  applied  by  the  debtor.  This  case  was  cited,  and 
a  decision  based  thereon,  in  /Spring  Garden  Association  v. 
Tradesmen's  Loan  Association?  in  which  Agnew,  J.,  held 
that  the  debtor  only,  and  in  the  absence  of  any  election  on  his 
part,  the  society  only,  could  make  the  application,  and  that  a 
purchaser  at  sheriffs  sale  could  require  nothing  which  the 
parties  did  not.  In  this  case  it  appeared  that  C.  had  given  a 
mortgage  and  assigned  stock  to  the  Tradesmen's  Loan  Asso- 
ciation, of  which  he  was  a  member.  He  subsequently  gave  a 
judgment  to  the  Spring  Garden  Loan  Association  upon  the 
same  property,  subject  to  the  first  mortgage.  After  he  had 
made  an  assignment  for  the  benefit  of  creditors,  the  mort- 
gaged premises  were  sold  at  sheriffs  sale,  to  the  Spring 
Garden  Loan  Association,  subject  to  the  first  mortgage,  and 
C.'s  assignee  notified  the  Tradesmen's  Loan  Association  of  the 
assignment  to  him,  and  that  he  claimed  the  stock  assigned  to 
them  as  collateral  security,  requiring  them  to  collect  the  whole 
amount  of  the  mortgage,  and  not  to  allow  any  deduction 
for  C.'s  payments  on  the  stock.  The  association  thereupon 
brought  an  action  of  scire  facias  on  their  mortgage,  and  the 
Spring  Garden  Loan  Association  took  defence  as  terre-tenants, 


chanics'  Building  and  Loan  Asso-  •*.  Mayer  et  al.,  1  Beas.  (N.  J.)  55; 

ciation  et  al.,  2  C.  E.  Gr.  (N.  J.)  and  see  Washington  Building  and 

497;  Red  Bank  Association  t>.  Pat-  Loan  Association  t>.  Beaghen  et  al., 

terson,    12    Id.    223;    Philipsburg  12  C.  E.  Gr.  (N.  J.)  99. 

Mutual  Loan  and  Building  Associa-  J  35  Pa.  St.  463. 

tion  v.  Hawk  et  al.,  Ib.  355;  Reilly  »  46  Id.  493. 


§  4G3.]         THE   STOCK   OF    BUILDING   ASSOCIATIONS.  467 

claiming  that  the  stock-payments  made  by  C.  upon  the  stock 
held  as  collateral  by  the  Tradesmen's  Loan  Association,  plain- 
tiffs, must  be  applied  to  part  payment  of  the  mortgage  debt. 
In  Link  v.  Germantown  Building  Association,1  property 
mortgaged  to  an  unincorporated  building  association  was  sold 
at  sheriff's  sale,  upon  a  judgment  against  the  owners,  to  L., 
who  does  not  appear  to  have  had  any  relations  to  the  owners, 
except  that  he  became  the  purchaser  of  their  lands  at  sheriff's 
sale,  at  which  notice  was  given  that  the  purchaser  would  take 
the  property  subject  to  the  mortgage  of  the  building  associa- 
tion. Suit  having  been  brought  by  the  latter,  L.  defended  as 
terre-tenant,  claiming  credit  for  the  stock-payments  made  by 
the  mortgagors.  But  Allison,  P.  J.,  whose  opinion  was  sub- 
sequently affirmed  by  the  Supreme  Court,  held,  upon  the 
authority  of  the  above  cases  (which  was  considered  applicable 
to  unincorporated  building  associations),  that,  there  having 
been  no  appropriation  of  the  stock  to  the  mortgage  debt  by 
either  the  borrower  or  the  building  association,  it  could  not 
be  compelled  by  the  purchaser  at  sheriff's  sale  defending  as 
terre-tenant. 

§  463.  The  same  doctrine  was  applied  in  Economy  Build- 
ing Association  v.  Xlungerbuehler?  to  a  somewhat  compli- 
cated state  of  facts.  II.  was  the  owner  of  the  property,  the 
building  association  first  mortgagee  for  $2200,  and  R.  second 
mortgagee.  S.  was  the  holder  of  a  judgment  against  H.  for 
$1400,  upon  which  H.'s  stock,  held  as  collateral  security  by 
the  building  association,  was  sold  to  S.,  subject  to  the  building 
association's  claims  upon  it.  The  building  association  being 
then  in  a  condition  to  wind  up,  i.e.,  having  reached  the 
limit  of  its  chartered  existence,  the  board  of  directors  passed 
a  resolution  directing  the  president  and  secretary  to  assign 
to  S.  the  mortgage  it  held  against  H.,  upon  receiving  from 
S.  the  arrearages  due  on  H.'s  stock,  $73.14 ;  which  arrange- 
ment was  consummated.  In  the  interval  between  the  pas- 
sage of  the  resolution  and  the  assignment  of  the  mort- 
gage, suit  was  brought  on  the  mortgage  in  the  name  of 
the  building  association,  to  the  use  of  S.,  against  H.  It  was 

1  89  Pa.  St.  15.  »  9  W.  N.  C.  218;  93  Pa.  St.  258. 


468  THE   LAW   OF   BUILDING   ASSOCIATIONS.      [CH.   XVII. 

admitted  that  II.  was,  at  no  time,  six  months  in  arrear  in 
the  payment  of  his  dues  and  interest  on  his  mortgage.  But 
judgment  was  taken  against  him,  by  default  of  apj>ear- 
ance,  for  $2346.37,  and  execution  issued.  Upon  the  petition 
of  R.,  the  second  mortgagee,  however,  the  judgment  was 
opened,  and  R.  let  into  a  defence.  Before  the  trial  R.  ob- 
tained judgment  on  his  (second)  mortgage,  and  purchased  the 
property  at  sheriff's  sale.  On  trial,  under  the  rulings  of  the 
court  as  to  what  was  evidence  of  an  application  of  the  stock- 
puyments  to  the  debt,  S.  got  a  verdict  for  $81.75, — the  amount 
he  had  paid  the  building  association  for  the  assignment  of  the 
mortgage,  with  interest  thereon,  and  judgment  was  entered 
accordingly.  The  Supreme  Court,  Gordon,  J.,  delivering  the 
opinion,  reversed  the  judgment,  saying,  as  to  the  application 
of  the  stock-payments  to  the  mortgage :  "  Either  of  the  origi- 
nal parties  might  have  made  such  application  before  the  levy 
of  S.'s  attachment,  but  this  was  done  by  neither  of  these  par- 
ties, and  so  S.,  by  virtue  of  his  attachment  took  the  place  of 
H.,  and  as  the  company  might,  at  H.'s  instance,  had  he  re- 
turned the  stock,  have  paid  to  him  the  value  thereof,  and  re- 
tained the  mortgage  (sic),  so  might  it  have  done  with  S.  In 
such  case,  however,  R.  could  not  be  heard  to  complain,  for  his 
position  as  second  mortgagee  could  not  be  in  the  least  affect- 
ed thereby.  This  stock  became  collateral  security,  not  for  his 
benefit,  but  for  that  of  the  association,  hence  its  surrender 
would  have  put  him  in  no  worse  position  than  he  was  when 
his  mortgage  was  executed.  Surely  then  R.  could  not  inter- 
vene to  prevent  the  disposition  of  collaterals,  in  which  he 
had  no  interest."  .  .  .  Then,  referring  to  the  case  of  Sjn-nxj 
Garden  Association  v.  Tradesmen's  Loan  Association,  to 
show  that  the  borrower  might  elect  to  draw  his  stock,  and  oblige 
the  society  to  proceed  upon  the  mortgage,  the  court  continues : 
"  But  if  the  association  plaintiff  could  have  paid  the  value  of 
the  stock  to  S.  and  retained  and  collected  the  mortgage,  why 
could  it  not  retain  the  stock  and  assign  the  mortgage  ?  It 
certainly  would  not  put  R.'s  mortgage  in  a  worse  position  be- 
cause S.  held  the  first  lien  rather  than  the  company.  S.  was 
undoubtedly  by  act  of  law  owner  of  this  stock,  which  was 
worth  some  $2200,  and  that  amount  he  had  the  right  to  de- 
mand of  the  company,  or  its  equivalent.  The  company,  on 


§464.] 


THE   STOCK    OF   BUILDING    ASSOCIATIONS. 


469 


the  other  hand,  had  the  right  to  retain  either  the  stock  or  the 
mortgage ;  it  chose  to  retain  the  stock,  and  by  assigning  the 
mortgage  to  S.,  as  in  that  case  it  w;^  bound  to  do,  it  thereby 
clothed  him  with  all  the  right  it  would  have  had,  had  it  paid 
him  the  value  of  the  collaterals  and  kept  the  mortgage.  This, 
however,  was  a  matter  for  themselves,  a  matter  with  which 
II.  had  nothing  to  do." ' 

§  464.  These  are  the  principal  cases  upon  which  the  Penn- 
sylvania doctrine  rests.4  They  all  profess  to  build  upon 
North  America  Building  Association  v.  Sutton*  That, 
however,  was  an  action  brought  against  the  building  associa- 
tion by  the  assignee  of  a  borrowing  member's  shares,  for  un- 


1  It  is  needless  to  point  out  the 
effect  of  this  adjudication  upon  the 
unfortunate  mortgagor,  who  thus, 
after  having  paid  into  the  building 
association  enough  money  to  make 
his  shares  worth  $2200,  lacking 
only  $73.14,  finds  the  mortgage 
which  he  intended  to  pay  off  with 
that  amount  standing  undiminished 
against  him,  in  the  hands  of  another 
creditor,  who  paid  $73.14  for  it, 
and  holds  a  judgment  against  him, 
besides,  for  $1400,  less  the  amount 
bid  upon  the  shares  at  the  execution 
sale,  when  they  were  sold,  subject 
to  the  building  association's  pleas- 
ure, as  to  whether  or  not  it  would 
apply  them  to  the  mortgagor's 
debt.  Again,  what  equities  had 
8.  superior  to  R?  It  has  been 
decided  again  and  again  that  the 
sale  of  stock  which  the  building 
association  holds  as  collateral  vests 
nothing  in  the  buyer  until  after 
the  building  association  is  satis- 
fied (Early  and  Lane's  App.,  89 
Pa.  St.  411;  and  ante,  §  459),  and 
that  an  assignor  of  such  stock  can- 
not require  the  building  associa- 
tion to  make  its  claim  out  of  the 
real  estate  on  which  it  also  holds 
a  lien  (Weiss's  App.,  5  W.  N. 
C.  423).  How  then  can  it  be  said 
that  S.  had  u  right  to  demand  $2200 


from  the  building  association,  or 
its  equivalent?  or  that  the  society 
was  bound  to  assign  him  the.  mort- 
gage, if  it  satisfied  its  own  claim 
out  of  the  stock?  The  previous 
decisions  in  Pennsylvania  recognize 
no  such  obligation,  and  it  certainly 
could  not  exist  where  there  was  a 
second  mortgagee  of  the  land, 
whose  claim  to  subrogation,  to  the 
one  fund  or  the  other,  was  at  least 
equal  to  that  of  a  mere  judgment 
creditor  who  has  attached  stock  in 
which  he  can  take  nothing  until 
after  the  society's  claim  has  been 
satisfied.  If  it  becomes  a  question 
between  a  mortgagee  or  purchaser, 
and  a  judgment  creditor,  the  weight 
of  decision  is,  that  the  equities  of 
the  former  are  stronger  than  those 
of  the  latter. 

9  See  also  Springville  Building 
Association  v.  Raber,  33  Leg.  Int. 
329;  24  Pittsb.  L.  J.  23;  Building 
Association  v.  Eshelbach,  7  Phila. 
189;  Selden  v.  Reliable  Savings  and 
Building  Association,  32  P.  F.  Sm. 
336;  Krcamer  v.  Springfield  Build- 
ing Association,  8  W.  N.  C.  267; 
Association  v.  Wall,  7  Phila.  189; 
Kingsessing  Building  Association  v. 
Roan,  9  W.  N.  C.  15. 

»  35  Pa.  St.  463. 


470  THE   LAW   OF   BUILDING    ASSOCIATIONS.    [CH.  XVII. 

justly  refusing  to  permit  the  transfer  upon  the  corporation 
books.  The  society  had  obtained  judgment  against  Sutton 
for  the  full  amount  of  the  mortgage,  less  the  premiums,  which 
were  not  recoverable  under  the  statutes  governing  the  case. 
This  amount  had  been  paid  by  the  assignee  of  the  shares  to 
the  building  association,  and  upon  its  refusal  to  recognize  him 
as  a  shareholder  the  suit  was  instituted,  Sutton  being  the 
nominal,  the  assignee  the  equitable,  plaintiff.  And  all  that 
that  case  assumed  to  decide  was,  that  the  positions  taken  by 
the  court  in  Guttenberg  Building  Association  v.  Kupfertj 
and  Hughes '#  App.?  were  "  not  to  be  regarded  as  laying  down 
the  rule  that  payment  of  dues  on  the  stock,  ipso  facto,  works 
an  extinguishment  of  so  much  of  the  mortgage.  The  debtor 
may  so  apply  it,  but  the  payment  itself  is  not  an  application 
of  the  money  to  the  reduction  of  the  mortgage.  To  hold  that 
it  is,  would  be  giving  to  the  associations  additional  facilities 
for  obtaining  excessive  interest.  The  debtor  is  not  compelled 
to  give  up  his  stock,  whenever  suit  may  be  brought  upon  his 
bond  or  mortgage.  Such  would,  however,  be  the  necessity 
of  his  case,  if  the  law  applied,  against  his  consent,  the  instal- 
ments paid  by  him  upon  his  stock,  to  the  discharge  of  his  in- 
debtedness for  the  money  borrowed."  The  rule,  therefore, 
as  first  laid  down,  was  designed  for  the  protection  of  the 
member  against  oppression  by  the  society.  Only  these  two 
were  before  the  court,  and  what  was  said  upon  adjudication  of 
their  rights  had  reference  to  two  parties  only.  No  third  per- 
son's equities  formed  any  element  in  the  case,  and  the  court  cer- 
tainly had  no  intention  of  deciding  what  the  remotest  bearing 
of  the  controversy  presented  could  not  bring  before  them,  or 
even  suggest.  It  was  established  as  a  rule  of  justice,  and  not  as 
an  engine  of  iniquity,  whereby  a  debtor,  with  the  connivance 
of  the  building  association  of  which  he  is  a  member,  perchance 
a  director,  may  keep  alive  a  first  mortgage  upon  his  property, 
whilst  his  ~bon.afide  creditor  continues  helplessly  holding  on 
to  a  second  mortgage, — the  mortgagor,  in  the  meanwhile, 
himself  drawing  out  of  the  treasury  and  applying  to  foreign 
purposes  the  fund  intended  for,  and  slowly  gathered  during 
a  series  of  years,  with  the  legitimate  object  of  extinguishing 
the  prior  encumbrance.  Nor  was  that  rule,  judging  from  the 
1  30  Pa.  St.  465.  » Ib.  471. 


§464.]          THE   STOCK    OF   BUILDING    ASSOCIATIONS.  471 

nature  of  the  circumstances  under  which  it  was  laid  down, 
ever  meant  to  assert  the  unquestionable  right  of  either  party, 
uninfluenced  by  the  just  claims  and  expectations  of  third  per- 
sons, to  exercise  a  capricious  or  malevolent  discretion  in 
throwing  the  entire  burden  of  a  debt,  secured  by  two  kinds 
of  securities,  upon  the  one,  though  it  is  the  only  protection 
available  for  the  other  creditor,  in  utter  disregard  of  the  equi- 
table doctrines  as  to  marshalling  of  assets  and  subrogation, 
whose  function  is  to  prevent  just  that  species  of  iniquity  and 
hardship  which  have  resulted  from  their  rejection  under  the 
misunderstood  formula,  '  payments  upon  stock  are  not  pay- 
ments to  the  mortgage.'  Those  doctrines  are  recognized  and 
applied  in  Pennsylvania  in  cases  to  which  building  associa- 
tions are  not  parties,1  and  there  is  no  reason  why  these  should 
form  an  exception,  as  is  shown  by  the  application  of  the  same 
principle  to  them  in  other  States.  Where  the  courts  are  in 
the  habit  of  adopting  the  method  of  subrogation,  rather  than 
that  of  restraint  upon  the  option  of  the  doubly  secured  cred- 
itor, in  availing  himself  of  the  one  or  the  other  of  the  funds 
at  his  command,  the  same  practical  result  is  attained.  The 
former  is  an  active  interposition  of  the  court,  which  is  largely 
a  matter  of  discretion  under  the  circumstances  of  the  case, 
and  which  it  may  become  difficult  to  enforce,  except  in  chan- 
cery proceedings ;  the  latter,  a  legal  consequence,  a  silent  op- 
eration of  law,  whose  simple  recognition  is  sufficient  to  pro- 
duce the  desired  results  under  any  form  of  procedure.  If, 
however,  the  effect  of  the  decisions  in  that  State  is,  to  deny 
the  applicability  of  the  principle  itself  to  cases  in  which  build- 
ing associations  hold  both  mortgage  and  assignment  of  stock 
as  security  for  the  same  debt,  whilst  another  creditor  has  but 
a  second  mortgage  upon  the  same  premises,  and  in  similar 
cases,  all  that  can  be  said  of  them  is,  that  they  are  in  conflict 
alike  with  reason  and  with  justice  and  equity,  as  expounded 
by  well-considered  and  respectable  authorities  in  all  the  courts 
of  the  civilized  world,  and  by  the  elaborate  discussions  of  the 
most  eminent  writers  upon  the  subject. 

1  Ramsey's  App.,  2  Watts,  228;  App.,   2  Pa.   St.   804;   McDevitt's 

Hastings'  Case,  10  Id.  303;  Lloyd  v.  App.,    70    Id.    373;    Carpenter   t>. 

Gnlbraith,  33  Pa.    St.    103;  Neff's  Koons,  20  Id.  222;  Hansell  r.  Lutz, 

App.,  2  Watts  and Serg.  36;  Shunk's  Ib.  484;  Holt  v.  Bodey,  18  Id.  207. 


472  THE   LAW   OF   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

§  465.  Nor  is  the  recognition  of  these  principles  at  all 
at  variance  with  the  rule  that  payments  on  stock  are  not, 
of  course,  payments  to  the  mortgage.  The  stock  and  the 
mortgage  are,  undoubtedly,  two  separate  things.  Like  two 
parallel  lines,  starting  from  opposite  extremes,  growing  in 
opposite  directions  at  equal  speed,  passing  along  side  by  side 
until  they  both  reach  equal  lengths,  the  one  ending  beside 
the  point  from  which  the  other  started,  yet  never  meeting, — 
the  stock  is  never  merged  in  the  mortgage,  nor  the  mort- 
gage in  the  stock.  The  right  of  the  shareholder  to  control 
his  stock  remains  intact,  along  with  the  like  right  of  the 
building  association  to  enforce  the  mortgage  against  the 
debtor,  and  the  land  mortgaged  is  the  primary  source  for  the 
payment  of  the  mortgage  debt.1  "Where,  therefore,  the  mem- 
ber does  in  fact  retain  an  unqualified  ownership  of  his  stock, 
there  can  be  no  talk  of  marshalling  assets  or  of  subrogation ; 
for  the  building  association  has  only  the  mortgage  to  look  to 
for  its  money.  But  where  the  borrower,  or  the  law,  gives  the 
association  a  lien  upon  his  stock,  collaterally  to  the  lien  upon 
his  land,  the  right  of  the  subsequent  mortgagee  of  the  same 
premises  "  is  absolute"  to  compel  application  of  the  fund 
upon  which  he  has  no  lien,  whilst  the  building  association 
has,  before  allowing  the  latter  to  deprive  him  of  the  possibil- 
ity of  making  his  own  claim,  by  resorting  for  its  own  satis- 
faction to  the  land  upon  which  they  both  have  encum- 
brances :  or,  at  least,  he  must  be  allowed  subrogation  to  the 
rights  of  the  building  association  upon  the  other  lien  which 
it  might,  but  preferred  not  to,  resort  to  for  payment  of  its 
claim. 

§  466.  It  stands  to  reason  that  the  doctrine  of  the  marshall- 
ing of  assets  and  subrogation  has  no  place  where  it  is  super- 
seded by  positive  contract  between  the  mortgagor  and  the 
purchaser  of  the  mortgaged  premises ;  whether,  by  the  agree- 
ment, the  latter  take  the  property  expressly  subject  to  the  full 

1  See  Link  v.  Germantown  Build-  gage.    Cooley's  App.,  1  Grant  (Pa.), 

ing  Association,  89  Pa.  St.  15;  Han-  401.     But  where  there  are  two  se- 

sell  v.  Lutz,  20  Id.  484.     The  mort-  curities  for  the  same  debt,  each  must 

gage  is  an  appropriation  of  the  land  bear  its  share.     Carpenters.  Koons, 

to  the  payment  of  that  particular  20  Pa.  St.  222;  Hansell  v.  Lutz,  Ib. 

debt,  binding  upon  a  purchaser  sub-  484;  Holt  P.  Bodey.  18  Id.  207;  Fer- 

sequent  to  the  giving  of  the  mort-  nav.  Crawford,  2  Denio(N.Y.),  595. 


§  407.  J         THE  STOCK   OF   BUILDING   ASSOCIATIONS.  473 

face-value  of  the  mortgage,  or  the  former  consent  to  reduce  it 
by  the  amount  of  the  stock-payments  standing  to  his  credit. 
The  latter  arrangement  is,  of  course,  binding  upon  the  build- 
ing association,  subject  to  its  claims  against  the  stock,  and  if 
the  purchaser,  being  a  mere  stranger,  buy  subject  to  the  mort- 
gage, its  whole  amount  must  be  presumed  to  have  entered 
into  his  calculation  as  to  the  value  of  the  property,  and  the 
price  paid  by  him  to  have  been  fixed  with  reference  to  it.1 
If,  buying  distinctly  subject  to  it,  he  was  the  holder  of  a 
second  mortgage  upon  the  land,  he  is  in  the  position  of  one 
who  has  accepted,  in  discharge  of  his  claim,  the  property  such 
as  it  is,  i.e.,  subject  to  all  the  liens  resting  upon  it,  and  the 
primary  source  of  their  satisfaction,11  and  his  mortgage  is 
merged.  In  the  one  case,  he  is  a  mere  stranger,  buying  sub- 
ject to  a  patent  claim  ;  in  the  other,  a  satisfied  creditor. 

Standing  of  Judgment  Creditors  as  to  Marshalling  of  Assets. 

§  467.  Whether  a  mere  judgment  creditor  is  surrounded 
by  the  same  potent  equities  which  protect  a  second  mort- 
gagee, or  purchaser,  in  demanding  the  application  of  these 
principles,  is  a  question  which  it  is  difficult  to  determine  from 
the  authorities.  As  between  the  two  classes,  in  reference  to 
the  questions  arising  upon  the  marshalling  of  assets,  it  is  said 
that  judgment  creditors  have  not  the  high  equities  belonging 
to  purchasers  and  mortgagees.  "  A  creditor  who  has  done 
nothing  more  than  to  convert  his  debt,  subsisting  in  the  form 
of  a  contract,  into  a  judgment,  has  no  claim  but  that  of  dili- 
gence, to  the  favor  of  equity.  Neither  natural  justice  nor 
public  policy  enacts  a  preference  for  him  over  adverse  claim- 
ants."' Thus,  C.  owed  the  building  association  money, 
secured  by  mortgage  and  an  assignment  of  stock  as  collateral. 
C.  gave  H.  a  second  mortgage  on  the  same  land.  II.,  later  on, 
had  to  take  the  land  to  save  at  least  a  part  of  his  claim.  So 
far,  the  case  was  clear,  that  the  building  association  must  look 
first  to  the  stock  for  its  money.  But,  Y.,  Z.,  creditors  of  C., 
had  obtained  judgment  against  him,  and  levied  on  his  stock 

1  See  The  People's  Savings  Bank  *  Herbert     v.     The    Mechanics' 

anil  Building  Association  v.  Collins,  Building  and  Loan  Association  of 

27  Conn.  145.  New  Brunswick,  2  C.  E.  Gr.  (N.  J.) 

*  See  Cooley'sApp.,  1  Grant  (Pa.),  497. 
401. 


474  THE    LAW   OP   BUILDING   ASSOCIATIONS.    [CH.  XVII. 

in  the  hands  of  the  building  association,  asking  the  court  to 
compel  the  latter  to  make  its  money  out  of  the  land,  so  as  to 
benefit  them  in  regard  to  the  stock.  This  was  refused.1 

Effect  of  Rights  of  Third  Parties  upon  Claim  for  Marshalling  of  Assets. 

§  468.  And  the  doctrine  of  the  marshalling  of  assets  will 
not  be  applied  to  the  injury  of  third  parties,  over  whom  the 
person  claiming  the  benefit  of  the  principle  has  no  superior 
equities.*  Where,  therefore,  M.  executed  a  mortgage  on  two 
lots  of  ground  to  the  Trenton  Mutual  Loan  Association,  as- 
signing to  them,  at  the  same  time,  as  collateral  security,  five 
shares  of  stock,  then  gave  complainant  a  mortgage  on  one  of 
these  lots,  and  finally,  after  the  execution  thereof,  assigned  to 
S.  and  O.  his  interest  in  the  five  shares  of  stock ;  it  was  held, 
that,  whilst  the  complainant  could  require  the  building  asso- 
ciation to  sell  first  the  lot  which  was  exclusively  covered  by 
its  mortgage,  he  had  no  equity  to  compel  the  appropriation  of 
the  stock  to  its  payment, — Williamson,  C.,  saying:  ''The 
question  is — what  equity  has  the  complainant  to  take  their 
(the  purchasers  of  the  stock)  property  for  the  relief  of  his 
security  ?  While  the  common  debtor  owned  the  stock,  there 
was  an  equity,  as  between  him  and  the  complainant,  that  in 
enforcing  the  mortgage  securities,  the  stock  should  be  applied 
to  the  payment  of  the  mortgage  to  which  the  debtor  had 

1  Ib.  See,  similarly,  Weiss's  App.,  if  the  land  of  the  wife  be  mortgaged 

5  W.  N.  C.  (Pa.)  423.  In  Lodge  ».  for  the  husband's  debt,  a  subsequent 

Lysely,  4  Sim.70;  6  Engl.  Ch.  R.37,  judgment  creditor  of  the  husband 

the  equitable  interest  of  a  purchaser  has  no  standing  to  claim  that  the 

for  value,  before  conveyance,  was  mortgagee  shall  proceed  first  upon 

preferred  to  the  claim  of  the  judg-  the  property  of  the  wife,  because 

ment  creditor  of  the  vendee.  Nor  is  the  latter's  equity  is  superior  to  that 

a  judgment  creditor  a  purchaser  or  of  the  husband,  and  necessarily  so 

mortgagee  within  the  letter  or  spirit  to  the  equities  of  his  creditors, 

of  Art.  24,  §  16  of  the  Maryland  Reynolds  v.  Tooker,  18  Wend.  (N. 

Code  (Knell  «.  The  Green  Street  Y.)  591.  See  also  Ayres  T.  II us- 

Building  Association,  84  Md.  67);  tard,  15  Conn.  504;  John  v.  Rear- 

nor  of  a  similar  statute  in  Pennsyl-  don,  11  Md.  465.  Nor  can  a  hen 

vania.  Rodgers  v.  Gibson,  1  Yeates,  creditor  invoke,  under  the  doctrine 

111;  Hiester  V.  Fortner,  2  Binn.  40;  of  marshalling,  any  security  taken 

Cover  v.  Black,  1  Pa.  St.  493 ;  Cad-  by  another,  which  had  not  become 

bury  v.  Duval,  1  Am.  Law  Reg.  a  lien  at  the  time  when  he  secured 

109.  his  own.  Miller  v.  Jacobs,  3  Watts 

*  Thus  it  has  been  decided,  that,  /Pa.),  477;  S.  C.  5  Id.  208. 


§  469.]         THE   STOCK   OF   BUILDING   ASSOCIATIONS.  475 

pledged  it,  in  such  manner  as  to  relieve  the  complainant's 
security.  Does  that  equity  follow  it  in  the  hands  of  a  lona, 
fide  purchaser  without  notice  ?  The  complainant  had  no  lien 
upon  the  property,  either  equitable  or  legal.  He  had  the 
right  merely  to  invoke  the  aid  of  a  court  of  equity  to  marshal 
the  securities  for  his  relief.  This  right  does  not  follow  the 
security  into  the  hands  of  a  bona  fide  purchaser  without 
notice.  The  rule  that  has  been  stated  as  a  general  one  '  has 
its  qualifications,  and  is  never  applied  except  where  it  can  be 
done  without  injustice  to  the  creditor,  or  other  party  in  in- 
terest, having  a  title  to  the  double  fund,  or  injury  of  a  third 
person,  over  whom  the  party  claiming  the  benefit  of  the  prin- 
ciple has  no  superior  equity.  There  certainly  can  be  no 
equity  in  permitting  the  complainant  to  appropriate  the 
property  of  these  innocent  persons  to  relieve  his  security. 
They  purchased  subject  only  to  the  mortgage  of  the  associa- 
tion. 

"  The  contract  between  the  association  and  the  mortgagor 
was,  that  the  stock  should  be  only  additional  security  to  the 
land  embraced  in  the  mortgage.  The  complainant  now  seeks 
to  change  the  contract  to  the  prejudice  of  these  third  persons. 
They  purchased  without  notice  of  his  equities,  if  he  had  any. 
They  are  innocent  purchasers.  There  was  nothing  to  put 
them  on  inquiry.  Notice  of  the  mortgage  to  the  association 
did  not  require  them  to  search  the  record,  for  the  purpose  of 
ascertaining  whether  there  might  not  possibly  exist  some 
equities  between  that  and  other  mortgages  to  affect  the  title 
of  the  stock." a 

Notice  of  Subsisting  Rights  to  Compel  Resort  to  One  of  Two  Funds. 

§  469.  If  there  are  any  equities  to  compel  the  prior  lien 
creditor  to  recover  satisfaction  from  any  particular  fund,  the 
subsequent  creditor  must  notify  him  thereof;  for  a  prior 
creditor  is  not  bound  to  know  of  the  existence  of  any  subse- 
quent encumbrance.3  The  creditor,  therefore,  having  a  lien 

1  See  rule  above  quoted  from  Association's  App.,  92  Pa.  St.  200. 

Story's  Eq.  Jur.,  §  633;  see  ante,  See  also  Bank  of  Pennsylvania  v. 

%  461.  Winger,  1  Rawle  (Pa.),  295;  Konig- 

1  Reilly  v.  Mayer  et  al.,  1  Beas.  maker  v.  Brown,  2Har.  274;  Adams 

(N.  J.)  55.  v.  Heffermnn,  9  Watts,  529.  And 

3  Uniontown  Building  and  Loan  the  equity  to  control  the  order  in 


476  THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVII. 

upon  two  funds,  does  not,  by  releasing  one  of  them,  prejudice 
his  right  as  to  the  other,  unless  expressly  notified  of  a  .<ul>M-- 
quent  encumbrance  which  is  a  lien  on  one  only  of  the  funds, 
and  cautioned  against  diminishing  his  security.  And  the  re- 
cording of  the  subsequent  encumbrance  is  not  notice  to  him.' 
But  where  the  building  association,  holding,  bc.-ides  a  mort- 
gage upon  the  borrower's  land,  an  assignment  of  his  stock  as 
collateral  to  his  mortgage,  released  the  stock,  with  actual 
notice  of  the  existence  of  a  subsequent  mortgage  on  the  land, 
it  was  held  that  the  prior  mortgage  was,  so  far  as  the  right  of 
the  subsequent  one  was  concerned,  satisfied  to  the  extent  of 
the  value  of  the  stock.* 

Taxation  upon  Capital- Stock. 

§  470.  Building  associations,  in  the  absence  of  any  special 
exempting  legislation,  are  liable  to  taxation  upon  their  capital 
stock  under  general  laws  providing  for  the  same  upon  the 
stock  of  other  corporations.3  The  fund  which  has  accrued 
from  monthly  payments  on  shares,  from  premiums  and  inter- 
est on  loans,  and  from  fines,  is  the  full  amount  of  the  capital 

which  several  properties  shall  be  recourse  to  the  stock  for  the  pay- 
sold  to  satisfy  a  common  encum-  ment  of  the  debt,  before  looking  to 
brance  is  one  against  the  execution,  the  land,  upon  which  both  mort- 
not  against  the  judgment.  Me-  gages  rested. 

Cormick's    App.,    57    Pa.    St.    54.  3  The  Bourgignon  Building  As- 

But  the  court  will  not  entertain  it  sociation  v.  The  Commonwealth,  10 

upon  a  motion  to  set  aside  the  exe-  W.  N.  C.  (Pa.)  161 ;  The  Excelsior 

cution.    Evans  v.  Thibault,  2  Miles  Building  Association  v.  The  Com- 

(Pa.),  251.  monwealth,   Ib.      The  Act  of    10 

1  Taylor's  Ex'rs  v.  Maris,  5  Rawle  Apr.,  1879,  exempted  building  as- 

(Pa.),  51 ;  Quakertown  Building  and  sociations  from  taxation  upon  stock. 

Loan  Association  t>.  Sorver  et  al.,  At  the  same  session  of  the  Legisla- 

33  Leg.    Int.   (Pa.)  259;    Patty  v.  ture,  the  Act  of  7  June,  1879,  was 

Pease,  8  Paige,  277;  Stuyvesant  v.  passed.    This  was  a  general  revenue 

Hone,  1  Sandf.  (N.  Y.)  419;  Reilly  act,  imposing  taxes  upon   all  cor- 

v.  Mayer  et  al.,  1  Beas.  (N.  J.)  55  porations    except    such    as    were 

(59);    Cheeseborough  v.  Millard,  1  named  therein,  among  these,  "sav- 

Johns.  Ch.  (N.  Y.)  409.  ings    institutions    when    they    de- 

*  The  Washington  Building  and  clare    no   dividends."     The   court 

Loan  Association  v.  Beaghen  et  al.,  held    the    later    act    repealed    the 

12  C.  E.  Or.  (N.  J.)  99;  because  the  former,  and  that  building  associa- 

subsequent  mortgagee  had  the  right  tions  were  not  exempted  by  the  Act 

to  compel  the  building  association,  of  7  June,  1879. 
being  the  prior  mortgagee,  to  have 


§470.]     DISSOLUTION    AND    EFFECTS   OF   DISSOLUTION.  477 

stock  and  accumulated  surplus  of  such  associations;  the 
former  being  the  aggregate  of  the  monthly  payments  on 
stock,  which,  by  the  fundamental  law  of  the  association,  are 
made  obligatory  on  all  stockholders  alike ;  while  other  pay- 
ments, which  are  in  effect  optional  with  those  who  make 
them,  represent  the  profits  of  the  scheme,  and  make  up  the 
accumulated  surplus.' 


CHAPTER  XVIII. 

DISSOLUTION    AND    EFFECTS    OF   DISSOLUTION. 

§  471.  Methods  of  termination  of  building  associations. 

§  472.  Events  whose  happening  ipso  facto  ends  corporate  existence. 

g  474.  Dissolution  by  voluntary  agreement  of  stockholders  and  surren- 
der of  franchise. 

§  476.  Surrender  may  be  inferred  under  certain  circumstances. 

§  477.  Dissolution  by  act  of  Legislature. 

§  478.  Dissolution  by  decree  of  court. 

§  479.  Grounds  of  forfeiture  of  franchises.     Who  entitled  to  ask  it. 

§  482.  Rights  of  and  grounds  for  appointment  of  receiver  by  court. 

§  485.  Insolvency.    Distribution  of  assets. 

§  488.  Persons  entitled  to  ask  for  appointment  of  receiver. 

§  490.  Right  of  members  to  ask  interposition  of  court  to  wind  up 
society,  when  shares  at  par. 

§  492.  Financial  condition  which  must  be  shown  to  exist.  Mortgages 
of  members  not  assets  for  winding  up. 

§  493.  Effect  of  expiration  of  charter  limitation  upon  society's  corpo- 
rate existence. 

1  State,  The  Washington  Build-  to  make  any  deduction  from  the 

ing   and  Loan  Association,  pros.,  amount  stated;  the  commissioners 

•».  Creveling,  10  Vroom  (39  N.  J.  of  appeal  sustained  his  decision ;  and 

L.  R.),  465;  S.  C.  affirmed,  11  Vroom  the  court  refused  to  disturb  the  as- 

(40    N.   J.   L.   R.),   192.       In    this  sessment,  as  an  actual  valuation  of 

case    the    secretary  of    the   build-  the  stock,  shortly  after,  showed  an 

ing  association,  when  called  upon  excess  of  $4000  over  that  amount; 

by  the  assessor,   returned  to  him  the  assessment  tax  being  upon  the 

$101,400.00,  as  the  amount  of  bonds,  full  amount  of  the  capital  stock  and 

mortgages,  and  notes  then  held  by,  accumulated    surplus.       See    also 

the    association    as    securities    for  State,    Washington    Building    and 

money  loaned   to  its  stockholders  Loan  Association,  pros.,  «.   Horn- 

and  others,  as  provided  for  in  its  backer,  Ib  Vr.  (N.  J.)  635;  ante,  § 

constitution.     The  assessor  declined  440  and  notes. 


478  THE   LAW   OP   Bl'Il.lUNt,    ASSOCIATIONS.   [CH.  XVIII. 

§  495.  Subsisting  liabilities  of  society. 

§  496.  Effect  of  dissolution  upon  obligations  of  borrowing  members. 
Exceptions. 

Methods  of  Termination  of  Building  Associations. 

§  471.  The  corporate  existence  of  a  building  association 
is  terminated  (1)  first  by  the  death  of  its  members ;  (2)  by 
the  expiration  of  the  franchise  under  original  charter  limita- 
tion upon  its  continuance;  (3)  by  a  valid  and  executed  agree- 
ment of  its  members,  or  voluntary  surrender  of  the  corporate 
franchise ;  (4)  by  the  action  of  the  Legislature ;  and  (5)  by 
the  decree  or  interference  of  court. 

Events  Whose  Happening  ipso  facto  Ends  Corporate  Existence. 

§  472.  The  events  whose  happening  put,  ipso  facto,  an 
end  to  the  society's  existence  are  only  the  first  two  men- 
tioned. As  in  all  other  corporations,  the  one  is  the  death  of 
all  or  an  integral  essential  part  of  its  members,1  where  there 
is  no  means  of  repairing  the  breach.  The  other  is  the  expira- 
tion of  the  time  for  which  the  corporation  was  created,  where 
the  period  is  fixed  by  the  constating  instrument  or  by  the 
general  law.*  It  is  immaterial  whether  the  limitation  as  to 
time  be  contained  in  the  general  law  only,  or  in  the  charter 
only,  or  in  both.  If  the  statute  fixes  the  maximum  time,  the 
omission  to  limit  it  by  charter  to  conform  with  the  statute, 
whilst  it  is  a  defect,  is  not  a  fatal  defect  in  the  instrument, 
nor  such  as  to  impair  the  building  association's  corporate 
existence.  The  limitation  will  be  supplied  from  the  general 
law,  and  treated  as  embodied  in  the  charter  to  conform  with 
it.s  Any  charter  grant,  under  the  general  law,  of  a  period  in 
excess  of  its  provisions  will  be  simply  void.4 

§  473.  Except  as  effected  by  the  happening  of  one  of 
these  events,  there  is  no  such  thing  as  an  ipso  facto  dissolu- 
tion of  the  corporation.  The  misuser  or  nonuser  of  the 
franchise  will  not  do  it.*  The  insolvency  of  the  society,'  or 
the  neglect  or  refusal  of  members  to  continue  their  stock- 

1  See  Angell  and  Ames,  Corp.,  %  *  See  ante,  §309,  and  post,  §§479- 

768;  Field,  Corp.,  §  490.  481,  and  ch.  xix. 

9  See  Angell  and  Ames,  Corp. ,  §  *  Gormerly  v.  The  Port  Richmond 

778  a;  Field,  Corp.,  §481.  Building  and  Loan  Association  et 

1  Miller's  Est,  2  Pears.  (Pa.)  248.  al.,  3  W.  N.  C..  (Pa.)  11;  and  see 

4  See  ante,  §  64.  post,  §  485. 


§  474.]     DISSOLUTION    AND   EFFECTS   OF   DISSOLUTION.  479 

payments  will  not  do  it.1  The  mere  omission  to  elect  officers 
will  not  accomplish  it,*  even  where  this  contingency  is  not 
specifically  provided  for  in  the  charter  or  general  law.'  It  is 
the  stockholders,  and  not  the  officers,  that  constitute  the  cor- 
poration.4 The  arrival  of  the  shares  at  the  value  fixed  as 
the  ultimate  one  in  the  charter,  does,  indeed,  necessarily 
bring  the  career  of  the  association  to  a  close.  "  Whenever 
the  assets  of  the  corporation  become  equal  to  the  par  value 
of  all  its  stock,  it  ceases  to  exist,  except  for  the  purpose  of 
winding  up  its  affairs." 6  The  precise  period,  however,  when 
this  occurs  is  so  much  a  matter  of  calculation,  based  upon 
knowledge  necessarily  within  the  possession  of  the  officers  of 
the  association  exclusively,  that  its  effect  in  dissolving  the 
corporation  can  be  obtained  only  in  one  of  two  ways,  either 
by  voluntary  winding  up,  or  by  a  decree  of  a  court,  upon 
investigation  of  the  affairs  of  the  society,  at  the  instance  of 
one  competent  to  demand  it,  and  upon  proof  that  the  time 
has  actually  arrived  when  the  assets  of  the  corporation  have 
become  equal  to  the  par  value  of  all  its  stock.* 

Dissolution  by  Voluntary  Agreement  of  Stockholders  and  Surrender 
of  Franchise. 

§  474.  It  is  a  well-settled  doctrine,  that,  in  the  absence  of 
charter  or  statutory  provisions  to  the  contrary,  a  private  cor- 
poration for  pecuniary  gain  may  dissolve  by  surrender  of  its 
franchises  by  agreement  among  its  members.  "  The  question 
as  to  the  unanimity  required  by  the  corporators  in  order  to 
accomplish  a  voluntary  surrender  of  corporate  franchises  may 
depend  upon  the  provisions  of  the  charter.  If  there  is  no 
provision  upon  this  subject,  and  no  definite  period  of  limita- 

1  Hoboken  Building  Association  P.,  Gormerly  v.  The  Port  Richmond 

v.  Martin,  2  Beas.  (N.  J.)  428.     See  Building  and  Loan  Association  et 

also    Watkins    t>.     Workingmen's  al.,  3  W.  N.  C.  11.     As  to  the  fact 

Building  Association,  10  W.  N.  C.  of  there  being  no  officers  as  a  ground 

<Pa.)414;  38  Leg.  Int.  333;  97  Pa.  for  asking  dissolution,  see  post,  § 

St.  514;  Hekelnkaempcr  t>.  The  Ger-  484 

man  Building  Association,  etc.,  22  3  Hoboken  Building  Association 

Kas.  549;    Thomson  v.    Ocmulgee  t>.  Martin,  ubi  supra.             *  Ib. 

Building  and  Loan  Association,  56  5  Hagcrman  et  al.  «.   The  Ohio 

Oa.  350.     But  see  post,  §§  501-502.  Building  and  Savings  Association, 

8  Hoboken  Building  Association  25  Ohio  St.  186. 

•c.  Martin,  ubi  supra.     See  also,  S.  •  See,  therefore,  post,  §§  493-494. 


480  THE    LAW    OF   BUILDING    ASSOCIATIONS.   [CH.  XVIII. 

tion  to  corporate  existence,  it  has  been  uniformly  held  tli;it  :i 
majority  may,  by  resolution,  surrender  its  charter  ;  but  if  it  i.s 
otherwise  provided  in  the  constating  instruments,  or  if  the 
duration  of  the  corporation  is  fixed  by  them,  unanimity  of  the 
stockholders  is  held  essential  to  a  surrender/' '  In  the  C;IM- 
of  building  associations,  the  period  of  duration  is  usually  iixcu 
either  by  charter  or  by  general  law.  Hence  the  action  of 
members  looking  towards  a  dissolution  by  agreement  must  be 
unanimous.  A  mere  majority  cannot  force  it  upon  the  rest, 
against  what  the  latter  conceive  to  be  their  interests.  So, 
it  was  held  in  Pennsylvania  that  the  borrowing  stockhold- 
ers, who  constituted  the  whole  membership  of  the  building 
association,  except  37,  who  were  non-borrowers,  could  not,  in 
order  to  wind  up  the  concern,  before  the  time  limited  by  the 
charter,  compel  the  few  non-borrowers  to  accept  a  sum  per 
share  less  than  the  amount  fixed  by  charter ;  and  the  prelim- 
inary injunction  was  continued." 

Even  in  the  absence  of  a  distinct  limitation  upon  a  build- 
ing association's  continuance,  expressed,  by  the  charter  or 
general  statute,  by  naming  the  number  of  years  for  which  the 
franchise  is  granted;  the  fact  that  each  individual  member 
has  in  the  concern  an  interest  accumulating  towards  a  stipu- 
lated final  amount  at  a  rate  giving  sufficient  data  to  calculate, 
with  tolerable  accuracy,  the  period  during  which  his  interest 
will  continue,  so  fixes  the  necessary  duration  as  to  him,  that 
it  would  appear,  that,  upon  this  ground,  too,  unanimous  con- 
sent must  be  obtained  in  order  to  effect  a  valid  agreement 
for  the  surrender  of  the  franchises.  Different  from  most 
other  corporations,  the  charter  of  a  building  association  im- 
poses upon  it  the  working  out  of  a  certain  task,3  within  a 

1  Field,  Corp.,  §  487,  where,  and  Acts  9  Apr.  1856,  §  1  (P.  L.,  293); 

under  §  486,  the  authorities  on  this  4  Apr.  1872,  §  1  (P.  L.,  40.) 

subject  are  collected.    Where  the  9  Pfnff  p.  Building  Association, 

statutes  provide    for    the    dissolu-  6  W.  N.  C.  (Pa.)  349.     The  case  of 

tion  by  voluntary  surrender  upon  The  Hoboken  Building  Ass'nr.  Mar- 

a  vote  of  the  majority  of  the  mem-  tin,  2  Beas.  (N.  J.)  428.  is  not  an  au- 

bers,  and  petition  to,  and  decree  by  thority  contra;   the  circumstances 

the  court,  this,  of  course,  overrides  having  been  peculiar,  and  the  ruling 

any  general  doctrine  of  law  applic-  of  the  court  dictated  by  them, 

able  where  no  such  provision  ex-  3  See  Pfaff  v.  Building  Associa- 

ists.      See,   e.g.,   in   Pennsylvania,  tion,  ubi  supra. 


§  476.]     DISSOLUTION   AND    EFFECTS   OF    DISSOLUTION.  481 

given  time,  or  at  least  by  a  process  whose  known  operation  af- 
fords a  tolerably  accurate  measure  of  the  contemplated  period. 
§  475.  But  where  the  stockholders  had  agreed  in  writing 
to  dissolve  the  association,  before  the  period  limited  in  ita 
charter  arrived  to  put  an  end  to  its  existence,  it  was  held  that 
such  agreement  was  valid,  and  not  only  bound  the  stockhold- 
ers (who,  it  appears,  had  all  consented  to  the  closing  out,)  but 
was  good  also  against  the  assignee  of  one  of  them.1 

Surrender  may  be  Inferred  Under  Certain  Circumstances. 

§  476.  Mere  nonuser  is  not  ipso  facto  a  surrender.*  But 
the  nature  or  purpose  of  a  building  association  is  such  that  a 
surrender,  by  unanimous  consent,  may  be  inferred  from  the 
fact  that  one  member  has  been  permitted  to  unite  in  his 
hands  all  the  live  shares  and  all  the  securities  held  by  the 
association.  A  case  occurred  in  Massachusetts,  the  circum- 
stances of  which  were  as  follows :  The  association  was  incor- 
porated under  St.  1854,  c.  454,  with  power  to  collect  monthly 
dues  and  fines,  from  its  members,  etc.  As  often  as  the  fund 
of  the  society  should  amount  to  a  certain  sum,  it  was  to  be 
applied  to  the  redemption  of  the  share  of  that  member  who 
would  bid  the  greatest  sum,  by  way  of  discount  or  premium, 
for  the  privilege  of  taking  out  his  distributive  share  at  once. 
He  should  then  cease  to  be  a  member,  but  give  bond  and 
mortgage  for  the  payment  of  the  sum  advanced,  namely 
monthly  dues,  "  to  be  applied  in  liquidation  of  the  principal 
sum,"  interest  monthly  until  the  monthly  dues  should  amount 
to  the  principal  sum,  and  fines.  Neither  interest  nor  fines 
should  be  deducted  in  computing  the  amount  due  on  the 
mortgage.  The  entries  in  the  books  of  the  secretary  should 
be  prima  facie  evidence  against  any  member,  but  an  appeal 
might  be  taken  to  a  meeting  of  the  association.  A  quorum 
should  consist  of  twenty-five  members.  Provision  was  also 
made  for  the  election,  duties,  and  removal  of  officers.  On 
November  30, 1866,  the  secretary  of  the  association  purchased 
and  took  assignments  to  himself  of  all  bonds,  mortgages  and 

1  White  Haven  Loan  and  Build-  its  charter,  cannot  be  inquired  into 

ing  Association  v.  Kelly  et  al.,  9  collaterally.     Ib. 

Luz.  Leg.  Reg.  (Pa.)  9;  and  an  ob-  *  Angell  and  Ames,  Corp.,  §  773; 

jection  that  the  association  was  not  cit.  Regents  of  the  University  of 

legally  organized,  or  had  forfeited  Md.  P.  Williams,  9  Gill  and  J.,  303. 


482  THE   LAW   OF   BUILDING    ASSOCIATIONS.   [CH.  XVIII. 

assets  of  the  association,  and  of  all  unredeemed  shares.  It 
was  held  that  the  mortgagors  might  redeem  upon  payment  of 
interest  on  their  loans  and  monthly  dues  and  lines  up  to  Nov. 
30,  1866;  and  the  reasoning  of  the  court  was  as  follows  :  "  In 
this  condition  of  things  (after  the  assignments  upon  Nov.  30, 
1866),  there  was  no  longer  a  quorum  of  members  necessary 
for  the  transaction  of  business,  no  meetings  could  be  held  to 
which  the  plaintiffs  (members)  could  appeal  from  the  entries 
of  the  secretary,  which  are  decided  by  the  by-laws,  to  be 
prima  facie  evidence,  nor  for  election  or  removal  of  officers  to 
whom  the  plaintiffs  (mortgagors)  must  apply  for  the  redemp- 
tion of  their  land  from  the  mortgage,  nor  for  any  other  cor- 
porate object  or  purpose.  .  .  .  The  liability  to  pay  monthly 
dues,  or  fines,  or  interest  on  the  amount  advanced,  cannot  ex- 
tend beyond  the  existence  of  the  corporation.  .  .  .  The  trans- 
action of  Nov.  30, 1866,  amounted  to  a  complete  suspension,  at 
least,  if  not  to  a  final  dissolution,  of  the  corporation  by  the 
unanimous  consent  of  all  members."  ' 

Dissolution  by  Act  of  Legislature. 

§  477.  Building  associations  may  be  dissolved  by  the  act  of 
the  Legislature,  wherever  such  action  does  not  impair  the  obli- 
gation of  contracts.*  Where  the  power  to  repeal  any  special 
charter,  or  all  charters  granted  to  corporations,  is  reserved  to 
the  legislature,  either  in  the  charter  conferring  the  franchise, 
or  in  the  general  acts  for  incorporation  of  such  societies,  or  in 
the  general  laws  of  the  State,  applicable  to  all  cases,  or  in  the 
constitution  of  the  State ;  the  Legislature,  in  its  discretion,  by 
virtue  of  its  paramount  authority  and  of  the  terms  of  its  un- 
dertaking with  the  association,  may  exercise  the  power  with- 
out becoming  guilty  of  any  violation  of  the  original  contract.3 

Dissolution  by  Decree  of  Court. 

§  478.  In  no  other  way,  except  in  one  of  those  indicated, 
can  a  building  association  be  dissolved  without  a  decree  of  a 
competent  judicial  tribunal,  ascertaining  and  declaring  the 
forfeiture  or  expiration  of  its  charter,  or  handing  its  affairs 

1  Cook  v.  Kent,   105  Mass   246  and  Loan  Ass'n,  56  Id    350 ,  and 

See  also  The  City  Loan  and  Build-  post,  §§  496-503.     See  also  Smith 

ing  Association  of  Augusta  v.  Good  et  al  v.  Virgin  et  al.,  33  Maine,  148. 

rich.  48  Ga.  445;  Goodrich  et  al.  t>.  «  See  ante,  §  65. 

Th->  City,  etc.,  Association.  54  Id.  »  See  Field,    Corp.,  §§  478-479; 

08;  Thomson  v.  Ocmulgee  Building  Angell  and  Ames,  Corp.,  §  769. 


§  479.]     DISSOLUTION    AND    EFFECTS   OF    DISSOLUTION.  483 

over  to  an  officer  appointed  by  such  tribunal,  for  the  purpose 
of  winding  np  the  concern,  with  a  view  to  doing  justice  to  all 
parties  interested.  In  the  exercise  of  its  franchises,  every 
corporation  is  bound  to  respect  rights  and  observe  its  responsi- 
bilities in  two  directions, — towards  the  State  which  granted 
them,  and  protects  it  in  the  exercise  of  them ;  and  towards  the 
individual  members  who  are  directly  and  pecuniarily  in- 
terested in  the  proper  administration  of  the  prerogatives 
granted,  as  well  as  towards  creditors  dealing  with  the  corpora- 
tion upon  the  guarantee  of  the  powers  possessed  by  the 
corporation,  and  the  assurance  of  its  solvency  implied  in  their 
legal  exercise.  It  is  clear,  therefore,  that  where  the  corpora- 
tion becomes  guilty  of  a  departure  from  the  contract  entered 
into  with  the  State,  and  for  the  carrying  out  of  whose  terms 
alone  the  latter  has  obligated  itself  and  granted  its  sanction,  it 
may  at  any  time  interfere  to  enforce  that  penalty  which  fol- 
lows the  unlawful  act,  the  forfeiture  of  the  franchises  granted. 
And  building  associations,  to  whom  the  State  grants,  from 
motives  of  public  policy,  such  extraordinary  powers  looking 
towards  the  accomplishment  of  certain  definite  objects  favored 
by  it,  are  no  exception  to  this  rule.  Nonuser  and  misuser 
may  equally  become  the  ground  of  a  forfeiture  of  the  charter 
at  the  instance  of  the  State.  The  former  need  scarcely  be 
considered  except  as  involved  in  the  latter ;  for  every  misuser 
necessarily  implies  a  neglect  to  use  the  precise  powers  in- 
tended to  be  given  by  the  charter,  in  subserviency  of  the 
purposes  contemplated  by  the  same.  But  a  case,  where  a 
building  association  simply  omitted  to  exercise  any  functions, 
or  engage  in  any  operations  by  virtue  of  its  incorporation,  has 
not,  it  is  believed,  ever  come  under  judicial  notice. 

Grounds  of  Forfeiture  of  Franchises.     Who  Entitled  to  ask  it. 

§  479.  A  misuser  of  the  corporate  franchise  is  any  de- 
parture from  the  legitimate  course  of  business  intended  to  be 
sanctioned  by  the  charter,  in  accordance  with  the  Act  of  Leg- 
islature under  which  it  is  issued,  whether  the  same  be  simply 
in  excess  of  the  powers  conferred,  or  neglect  of  the  duties 
imposed,  or  involve  a  radical  change  or  disregard  of  the  pur- 
poses of  the  grant.  "  In  general,  to  work  a  forfeiture,  there 
must  be  something  wrong,  arising  from  wilful  abuse,  or  im- 


484  THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVIII. 

proper  neglect;  something  more  than  accidental  negligence, 
excess  of  power,  or  mistake  in  the  mode  of  exercising  an 
acknowledged  power.  A  single  act  of  abuse,  or  wilful  nou- 
frasance  in  a  corporation,  may  be  insisted  on  as  a  ground  of 
total  forfeiture ;  but  a  specific  act  of  noufeasance,  not  com- 
mitted wilfully  or  negligently,  not  producing,  nor  having  a 
tendency  to  produce,  mischievous  consequences  to  any  one, 
and  not  being  contrary  to  any  particular  requisition  of  the 
charter,  will  not  work  a  forfeiture."  '  Thus,  whilst  the  occa- 
sional taking  of  notes  and  bills  by  a  building  association,  or 
their  acceptance  as  a  mere  means  of  safe-keeping  and  in- 
vestment of  its  funds,  in  the  course  of  its  legitimate  business, 
would  constitute  no  ground  of  complaint  against  the  society ; 
if  it  had,  to  any  extent,  substituted  the  business  of  purchasing 
and  discounting  paper  for  its  legitimate  business,  buying  it 
for  the  purpose  of  gain,  and  with  a  view  to  employ  the  pro- 
ceeds in  buying  again,  that  would  be  aground  of  forfeiture.* 
So,  also,  would  be  the  deliberate  acquisition,  holding,  and  deal- 
ing in  more  real  estate  than  the  law  or  charter  allows  the 
building  association  to  purchase  and  hold.*  A  similar  wrong- 
ful intent  is  shown  by  the  fact  that  the  articles  of  association, 
or  by-laws,  contain  provisions  not  authorized  by,  or  contrary 
to,  the  general  act,  and  these,  besides  being  utterly  void,4 
may,  therefore,  become  the  ground  of  forfeiture.5  But  it  is 
said,  that,  where  a  corporation  has  abused  or  misused  its  cor- 
porate power,  but  not  in  any  particular  as  to  which  it  is  de- 
clared by  statute  that  the  act  shall  operate  as  a  forfeiture  of 
its  charter,  the  court  is  vested  with  a  discretion  to  determine, 
whether  the  corporation  shall  be  ousted  of  its  franchise  to  be 
a  corporation,  or  merely  from  the  exercise  of  the  powers  ille- 
gally assumed." 

1  Angell  and  Ames,  Corp.,  §  776.  83;  State  v.  Greenville  Building  As- 

*  Manufacturers'    &    Mechanics'  sociation,  29  Ohio  St.  92. 

Bav.  &  Loan  Co.  v.  Conover,  5  Phila.  8  Becket  c.  Uniontown  Building 

(Pa.)  18.     See  also  State  v.  Green-  Association,  88  Pa.  St.  211;  Rlioads 

ville  Build'g  Ass'n,  29  Ohio  St.  92.  v.  Hoernerstown,  etc..  ubi  supra. 

3  Miller's  Est.,  2  Pears.  (Pa.) 248;  8  State  t>.  The  Oberlin  Building 
Rhoads  v.  Hoernerstown  Building  and  Loan  Association.  35  Ohio  St. 
Association,  82  Pa.  St.  180;  and  see  258.     See  also  The  People  v.   The 
ante,  §§  303-308.  Troy  House  Co.,  44  Barb.  (N.  Y.) 

4  Stiles's  App.,  9  W.  N.  C.  (Pa.)  625. 


§  481.]      DISSOLUTION    AND    EFFECTS   OF   DISSOLUTION.  485 

§  480.  Any  material  defect  in  the  proceedings  of  incorpo- 
ration ;  any  omission  of  a  step  or  performance  of  duty  made 
essential  by  the  act,  in  order  to  render  the  society,  desirous  of 
the  privilege  of  corporate  existence  and  action,  a  rightful  and 
legally  qualified  party  to  the  contract  with  the  State,1  whose 
form  and  substance  it1  is  the  prerogative  of  the  latter  to  pre- 
scribe and  define;"  any  fraud  or  misrepresentation  in  induc- 
ing the  State  to  accede  to  the  requested  grant  of  the  franchise,* 
— are  equally  breaches  of  which  the  State  may,  at  any  time, 
avail  itself  to  avoid  the  charter  granted  defectively,  or  to 
persons  imperfectly  qualified  under  the  law,  or  upon  im- 
proper representations. 

§  481.  But  all  these  are  grounds  of  which  the  State  alone 
may  avail  itself  in  instituting  proceedings  to  deprive  the 
building  association  of  its  corporate  franchises.  It  is  the  State 
alone  which  is  injured  or  imposed  upon  by  the  wrong-doings 
of  the  corporation ;  and  it  is  with  the  State  only  that  the  latter, 
in  rebelling  against  its  sovereign  authority,  or  betraying  its 
confidence,  has  violated  the  original  contract  of  recognition  and 
protection  subsisting  between  the  creature  and  the  creator.  On 
grounds  of  misbehavior,  therefore,  of  the  building  association 
in  its  corporate  capacity,  it  belongs  to  the  State  alone,  to  re- 
voke, upon  direct  proceeding  in  quo  warranto,  and  by  a  de- 
cree properly  promulgated  through  the  medium  of  its  judi- 
cial tribunals,  or  by  legislative  exercise  of  the  powers  inhe- 
rent to  its  sovereignty,  the  privileges  granted  to  the  corpora- 
tion. No  private  person  can  ask  for  its  dissolution  *  on  such 
grounds,  nor  insist  upon  the  consequences  with  which  the 
State  might  visit  corporate  misbehavior,  for  the  purpose  of 
escaping  his  contract  obligations  with  the  association.6 

1  Becket  v.  Uniontown   Building  Savings    Association,    appellee,    v. 

Association,    ubi  supra;  Working-  Graham,    appellant,    7    Neb.    173; 

men's  Building  Association  v.  Cole-  Same  fl.  Benjamin  and   Benjamin, 

man,  89  Pa.  St.  428.  appellants,  Ib.  181.     And  see  post, 

1  Martin  v.  The  Nashville  Build-  §§  489,  490-491,  506-508. 

ing  Association,  2  Cold.  (Tcnn  )418;  4  Except  where  the  statute  gives 

Gordon,   etc.,   v.   The    Winchester  the  court  the  power  to  dissolve  a 

Building  and  Accumulating  Fund  corporate  body  upon  request,  in  the 

Association,  12  Bush  (Ky.)  110.  prescribed  form,  of  a  certain  pro- 

s  See    Pattison    t?.    The    Albany  portion  of  its  members. 

Building  and  Loan  Association,  63  &  See  post,  §§  506-508.      A  case 

Ga.  373;  The  Lincoln  Building  and  arose  recently  in  England,  in  which 


486  TIII:  LAW  OF  BUILDING  ASSOCIATIONS.  [CH.  XVIIL 

Right  of,  and  Grounds  for,  Appointment  of  Receiver. 

§  482.  A  temporary  administration  of  the  corporate  fran- 
chises may,  however,  be  assumed  by  the  courts,  upon  the 
petition  of  proper  parties  in  interest,  and  upon  a  sufficient 
showing  of  facts.  Where,  therefore,  it  appears  that  the 
affairs  of  a  building  association  are  managed  in  such  a  man- 
ner as  to  jeopardize,  beyond  a  reasonable  hope  of  recovery, 
the  interests  of  its  members ;  or  that  the  termination  of  the 
society's  present  system  of  operations  is  necessary  to  save 
them  from  further  losses,  some  such  having  already  fallen 
upon  them, — it  becomes  a  right  in  them  to  apply  to  the  courts 
for  such  process  and  interference  as  may  be  proper  in  the 
premises.  Mismanagement  of  the  association's  affairs  by  its 
officers  will,  as  has  already  been  seen,  give  rise,  under  certain 
circumstances,  to  personal  liability  in  them  to  the  corporation, 
which,  upon  the  refusal  of  the  society  to  enforce  it,  may  be 
asserted  by  individual  members  suing  for  the  benefit  and  pro- 
tection  of  the  whole.1  But  where  such  mismanagement  is 
going  on,  and  the  mischief  ensuing  therefrom  in  its  nature  ir- 
remediable and  continuing,  it  also  becomes  the  ground  of  an 
application  for  the  appointment  of  a  receiver,  at  the  hands  of 
a  court  of  chancery,  to  take  charge  of  the  association's  affairs 
to  the  best  advantage  of  all  parties  interested.  It  is  said,  in 
Virginia,5  that  a  court  of  equity  has  jurisdiction,  at  the  suit 
of  iinredeemed  shareholders "  in  a  building  association,  to  call 
the  redeemed  shareholders  to  account,  enforce  payment  of 
what  they  respectively  owe,  and  distribute  the  fund  among 
the  unredeemed  shareholders, — thus  embracing  the  whole 
series  of  steps  necessary  to  bring  about  the  winding-up  of  the 
concern,  by  making  the  corporation  and  its  debtors  all  parties 

certain  members  of  a  building  soci-  *  See  ante,  §  213. 
ety  endeavored  to  obtain  a  decree  s  Edelyn  et  al.  v.  Pascoe  et  al., 
of  dissolution  against  the  corpora-  22  Grattan,  826. 
lion,  on  the  ground  of  irregularity  3  Redeemed  members,  or  borrow- 
in  the  proceedings  of  organization,  ers,    in    building    associations    are 
for  the  purpose,  later  on,  of  enforc-  not,  in    Virginia,   considered    any 
ing  the  personal  liability  of  trustees  longer  as  members.     See  White  v. 
who  had  acted,   it  was  supposed,  Mechanics'    Building    Association, 
illegally.     But  the  court  of  chan-  22  Grattan.  233;  Winchester  Build- 
eery  declined  to  entertain  the  peti-  ing  Association  v.  Gilbert,  23  Id 
tion.     Glover  et  al.  v.  Giles  et  al.,  787. 
L.  R,  18  Ch.  173. 


§  483.]     DISSOLUTION   AND    EFFECTS   OF   DISSOLUTION.  487 

to  one  bill.1  But,  whilst  the  right  to  appoint  receivers,  in 
proper  cases,  resides  in  the  equity  court,  by  virtue  of  statu- 
tory powers  conferred  upon  it  to  exercise  a  visitatorial  super- 
vision over  corporations,  this  authority  is  not  usually  exer- 
cised, in  the  absence  of  express  legislative  grant,  "  for  the  pur- 
pose of  sequestering  the  effects  of  the  corporation  and  closing 
up  its  affairs,  but  merely  for  the  purpose  of  using  the  fran- 
chises, and,  through  the  management  and  control  of  the  cor- 
porate powers  by  the  receiver,  to  secure  the  application  of  the 
revenues  and  net  profits  of  the  corporate  business,"  to  the 
objects  entitled  to  such  protection  in  the  eyes  of  a  court  of 
equity.11  In  the  case  of  building  associations,  this  will  practi- 
cally, in  most  instances,  amount  to  a  dissolution. 

§  483.  The  interposition  of  a  court  of  equity,  by  appoint- 
ing a  receiver  for  a  building  association  and  enjoining  its 
management  from  interfering  in  its  affairs,  at  the  suit  of 
shareholders  alleging  mismanagement,  fraud,  and  gross  neg- 
ligence in  the  officers,  should  not  ordinarily  be  granted  with- 
out giving  the  association  an  opportunity  to  be  heard  by  an- 
swer ;  or,  if  this  cannot,  from  the  nature  of  the  case,  be  done, 
it  becomes  the  duty  of  the  complainant,  not  only  to  show  that 
he  has  an  interest  in  the  property  in  dispute,  but  that  the  in- 
terference of  the  court  is  absolutely  necessary  to  preserve  it 
from  loss  and  injury.3  But  where  a  bill  filed  by  members 
charged  the  officers  of  the  building  association  with  gross 
and  fraudulent  mismanagement,  breach  of  by-laws,  and  con- 
nivance with  defaulting  officers,  setting  forth  these  matters 
specifically :  and  averred  that  the  directors  had  refused  to  take 
steps  to  recover  the  amount  due  by  the  defaulting  officers ; 
that  they  were,  at  the  time,  doing  business  without  a  treasurer 

1  The  bill   is  not,  thereby,  made  ing  Association,  Estate  of,  9  V,'.  X. 

obnoxious  to  the  objection  of  mul-  C.  (Pa.)  79;  Goodrich  i\  City  Loan 

tifariousness,    but    looks    to  doing  and  Building  Association,  54  Ga. 

complete  justice  to  all  the  parties;  98. 

Edelyn  v.  Pascoe,  ubi  supra.     But  9  Field,  Corp.,  §  416.      See  also 

upon  such  a  proceeding,  in  taking  §§  415-417. 

the  account  of  the  redeemed  share-  3  Frostburg  Building  Association 

holders,  interest  is  not  to  be  charged  et  al.  v.  Stark  et  al.,  47  Md.  338; 

upon  the    interest  and    premiums  cit.  Blondheim  r.  Moore,  11  Id.  365; 

charged  against  them  on  the  books  Trie-fort  P.  Burgess,  Ib.    452;  Nus- 

of  the  association.      Ib.     See  also  bauin  r.  Stein,  12  Md.  315;  Owen 

Savings  Loan  and  Build-  v.  Human,  4  II.  L.  C.  997,  1032. 


488  THE   LAW   OF   BUILDING   ASSOCIATIONS.  [CH.  XVIII. 

and  bonded  secretary ;  that  the  mismanagement,  fraud  and 
negligence  still  continued  ;  and  that  the  building  association, 
although  long  enough  in  operation  to  have  redeemed  all  its 
shares,  was  $24,700  in  debt,  accompanying  the  bill  with 
an  exhibit,  the  report  of  a  committee  of  shareholders  ap- 
pointed to  investigate  the  association's  affairs,  showing  that 
they  could  find  no  records  of  the  minutes  of  the  proceedings 
of  the  Board  of  Directors,  but  sustaining  the  bill  in  every 
respect  upon  data  secured  otherwise  and  from  various  other 
sources ; — it  was  held  that  the  court  was  justified  in  granting 
the  injunction  and  appointing  a  receiver  in  an  ex  parte  pro- 
ceeding, no  answer  having  been  filed  by  the  building  associa- 
tion denying  the  bill,  and  no  motion  being  made  by  it,  on  the 
strength  of  such  a  denial,  to  dissolve  the  injunction  and  dis- 
charge the  master.1  A  fortiori,  if,  upon  examination  into  the 
facts  of  the  case,  these  were  found  to  sustain  the  bill,  would 
the  decree  granting  the  injunction  and  appointing  a  receiver 
be  proper,  in  the  case  of  a  building  association  as  in  that  of 
other  corporations. 

§  484.  But  the  mere  allegation  that  the  building  associa- 
tion was  without  any  responsible  officers  does  not  seem  to  be 
a  sufficient  ground  for  asking  the  interposition  of  a  court  of 
equity,  even  if  coupled  with  an  averment  of  the  society's  in- 
solvency.* 

Insolvency.    Distribution  of  Assets. 

£  485.  Insolvency  does  not  dissolve  a  corporation.3  It 
"  neither  impairs  its  power  to  manage  its  own  affairs,  nor  con- 

1  The  Frostburg  Building  Asso-  such  whilst  he  had  an    adequate 

ciation  et  al.  v.  Stark  et  al.,  47  Md.  remedy  at  law.     It  is  ruled  without 

338.     The  building  association,  in  opinion,    but,    it  would  seem,  cor- 

this    case,    merely    appealed   from  rectly  upon  principle.     See  post,  §§ 

the  ex  parte  decree    of  the   court  488-489. 

below.  »  Railway  Co.  v.  Filler,  60  Pa.  St. 

1  Gormerlyu.The  Port  Richmond  132;  Wider.  Jenkins,4 Paige (N.Y.), 

Building  and  Loan  Association  et  481 ;  Brinkerhoff  v.  Brown,  7  Johns, 

al.,  3  W.  N.  C.  (Pa.)  11.     See  also  Ch.  (N.  Y.)217;  Micklesp.  Roches- 

Hoboken    Building   Association  v.  ter  Bank,  11   Paige  (N.  Y.),   118; 

Martin,  2  Beas.  (N.  J.)  428.     In  the  Barclay  v    Tallman,  4  Edw.    Ch. 

former  case  (Gormerly  v.  Port  Rich-  (X.  Y.)  123;  State  v.  State  Bank  of 

mond,   etc.,    Association)  it  seems  Maryland,  6  Gill  and  Johns.  (Md.) 

that  the  member   petitioning  was  205 ,    Rollins    c.    Clay,   33   Maine, 

also  a  creditor,  and  petitioned  as  132. 


§  485.]     DISSOLUTION    AND    EFFECTS   OF   DISSOLUTION.  489 

verts  its  property  into  a  trust  fund  for  the  benefit  of  its  cred- 
itors." '  But  where  it  necessitates  the  abandonment  of  the 
enterprise,  the  proper  method  to  pursue  is  by  way  of  petition 
by  members  to  the  court,  for  the  appointment  of  a  receiver. 
For  where,  upon  that  ground,  the  winding  up  of  a  building 
association's  affairs  becomes  desirable,  it  has  been  decided  in 
Pennsylvania,  that  the  proper  course  is  through  a  court  of 
equity,  by  means  of  a  receiver,  and  not  by  an  assignment  of 
its  property,  under  the  insolvency  laws,  to  an  assignee  for  the 
benefit  of  creditors."  The  case  in  which  this  question  arose 
is  peculiarly  illustrative  of  the  difficulties  which  a  mere 
assignee  would  encounter,  and  to  which  he  would  inevitably 
have  to  succumb.  The  building  association  was  a  serial  one, 
incorporated  in  1866.  It  continued  issuing  series  of  stock 
until  1878,  when,  on  Aug.  29,  by  an  almost  unanimous  vote, 
an  assignee  for  the  benefit  of  creditors  was  put  in  charge  of 
its  affairs.  Two  years  previously,  the  first  series,  declared  full 
at  $1 80  per  share,  had  matured,  and  part  payments  on  account 
had  been  made  to  its  holders.  No  other  series  had  matured. 
Before  the  auditor,  appointed  by  the  court  to  make  distribu- 
tion of  the  balance  appearing  from  the  assignee's  account  filed 
to  be  in  his  hands,  appeared  (1)  the  holders  of  shares  in  the 
first  series,  who  held  orders  upon  the  treasurer,  on  which  part 
payment  had  been  made,  and  who  claimed  the  full  value  of 
the  stock  as  ascertained  at  its  maturity;  (2)  withdrawing 
members  who  had  given  notice  prior  to  the  assignment, 
some  holding  orders  upon  the  treasurer  for  what  was  due 
them,  and  all  claiming,  in  accordance  with  the  constitution 
and  by-laws,  the  amount  of  the  money  they  had  paid  in,  to- 
gether with  six  per  cent,  interest  after  the  first  year ; s  (3)  the 
holders  of  shares  in  the  second  and  subsequent  series  who  had 
not  given  notice  of  withdrawal,  and  claimed  that  division  of 

1  Angell  and  Ames,  Corp.,  §  770;  Building  Association  et  al.,  31  Leg. 
cit.   Pondville    Co.   v.    Clarke,   25  Int.  (Pa.)  357.     And   see   Peto  «. 
Conn.  97.     But  a  sale  by  an  insol-  Hammond,  8  Jur.,  N.  S.  550;  31  L. 
vent  corporation  of  its  real  estate  to  J.,  Ch.  354;  30  Beav.  495. 
a  stockholder  for  stock,  makes  such  *  In  re  Assigned  Estate  of  The 
purchaser  liable  for  its  value  in  cash  National  Savings,  Loan  and  Build- 
to  the  corporation's  creditors.     The  ing  Association,  9  W.  N.  C.  79. 
Chambersburg  Woollen  Co.  v.  The  »  See  Act  13  April,  1859. 
Chambersburg  Manufacturing  and 


490  THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVIII. 

the  assets  should  be  made  among  all  claimants  pro  rata.  The 
hitter  course  was  adopted  by  the  auditor,  and  the  whole  mat- 
ter was  brought  before  the  court  upon  exceptions  tiled  by  the 
holders  of  the  first  series,  to  his  report.  President  Judge 
Ludlow,  in  his  opinion,  said  that  a  building  association,  from 
the  nature  of  its  business  and  limited  extent  of  its  legitimate 
operations,  could  have  but  few  creditors  strictly  so  called  ; 
that  the  organization  is,  in  fact  and  in  law,  a  partnership  with 
corporate  rights,  in  which  every  stockholder  is  a  member; 
and  that,  whilst  it  may  be  true  that  every  stockholder  may 
recover  a  judgment  against  the  corporation  when  his  right  to 
receive  his  certain  share  has  become  perfected,  and  thus  be- 
come, in  a  sense,  a  creditor,  yet  the  peculiar  nature  of  the 
constitution  and  by-laws  of  a  building  association  clearly  indi- 
cate that  an  assignment  for  the  benefit  of  creditors  could 
never  be  intended  to  reach  such  creditors  as  the  members  of 
a  building  association  must  be,  who  have  even  obtained  judg- 
ment upon  their  claims.  The  execution  of  such  a  judgment 
might,  at  the  discretion  of  the  court,  be  deferred  in  order  to 
give  the  building  association  a  reasonable  time  to  collect 
money  enough  to  satisfy  its  withdrawing  member, — a  right 
which,  as  opposed  to  an  ordinary  creditor,  would  not  be  con- 
ceded to  it.  The  learned  judge,  therefore,  held,  that  under  an 
assignment  like  the  one  executed  in  this  case,  the  creditors, 
within  the  meaning  of  the  assignment  laws,  were  not  those 
whose  claims  depended  upon  a  former  membership  in  the  as- 
sociation and  consequent  ownership  of  its  stock,  no  matter  to 
what  series  the  stock  owned  might  belong ;  and  he  directed 
that  the  general,  outside  creditors  of  the  association,  if  there 
be  any,  should  be  at  once  paid,  and  intimated,  that,  this  hav- 
ing been  done,  upon  a  petition  in  the  usual  form  being  pre- 
sented, he  would  order  a  reconveyance  of  the  entire  property 
remaining  in  the  assignee's  hands  to  the  building  association  ; 
whereupon  a  bill  in  equity  should  be  prepared  at  the  suit  of 
those  interested  in  a  final  settlement,  in  which  it  should  ap- 
pear that  the  corporation  was  insolvent,  that  its  assets  might 
be  lost,  and  that  by  the  appointment  of  a  receiver  the  rights 
of  all  would  be  protected.  Then,  if  the  case  be  a  proper  one 
upon  the  bill,  answers  and  proofs,  a  receiver  would  be  ap- 
pointed, by  n  cautious  and  prudent  policy  to  wind  up  the 


§  48?.]     DISSOLUTION   AND   EFFECTS   OF    DISSOLUTION.  491 

affairs  of  the  concern,  and  the  assets  so  marshalled  and  dis- 
tributed by  a  final  decree  as  to  do  justice  to  all  parties.1 

§  486.  The  principle  upon  which  the  distribution  as  be- 
tween the  members  should  proceed,  seems  indicated  in  an 
English  case.  By  the  rules  of  a  building  association,  realized 
members,  who  had  by  their  subscription,  with  interest  and 
bonuses,  made  up  the  full  amount  of  their  shares,  were  en- 
titled to  payment,  or  certificates  for  payment,  in  rotation,  of 
such  amount ;  and  withdrawing  members,  who  had  not  made 
up  the  full  amount  of  their  shares,  but  had  given  notice  to 
withdraw,  were  entitled  to  like  payment  or  certificates  for  the 
amount  of  their  subscription,  with  interest.  In  the  winding- 
up  of  the  society,  it  was  held  that  these  two  classes  stood  in 
the  position  of  creditors  entitled  to  be  paid  in  priority  to  in- 
vesting members,  who  had  not  made  up  their  shares,  and  had 
given  no  notice  of  withdrawal.11 

§  487.  Members  of  an  insolvent  building  association, 
who  are  also  its  creditors,  are,  of  course,  entitled  to  come  in 
upon  the  distribution  of  its  assets  as  such.3  And  it  makes 
no  difference  if  the  capacity  of  director  be  joined  with  that 
of  member  or  creditor,  where  the  individual  has  not  been 
guilty  of  any  fraud  or  culpability  in  bringing  about  the  in- 
solvency. But,  if  he  has  been  instrumental  in  bringing  about 
the  wreck,  he  will  be  postponed  to  all  the  innocent  members. 
So,  one  who  was  a  director  of  a  building  association,  long  in- 
solvent by  declaring  dividends  out  of  the  capital,  with  his 
knowledge  and  participation,  is  not  entitled  to  receive  from 
the  estate  of  the  corporation,  in  the  hands  of  an  assignee,  any 
part  of  a  loan  made  by  him  to  the  corporation,  to  pay  a  divi- 
dend fraudulently  declared,  until  the  stockholders  are  fully 
paid.  "  The  question  is  not  whether  he  might  have  enforced 
his  demand  against  the  corporation,  if  it  were  solvent,  but  he 
here  seeks  to  have  satisfaction  out  of  a  fund  which  belongs  to 
the  stockholders,  whose  interest  he  has  betrayed.  The  cor- 
poration is  insolvent,  and  some  one  must  lose.  Shall  it  be 
the  innocent  stockholders,  or  the  guilty  participant  in  the 

1  In  re  Assigned  Estate  National  Provident  Building  Soc'y,  ex  parte 

Savings,  Loan  and  Building  Asso-  Rackham,  45  L.  J.,  Ch.  Div.  785. 

ciation,  vbi  supra.  3  As  to  members  as  creditors,  see 

*  lu    re    Norwich    and    Norfolk  ante,  §§  264-268. 


492  THE   LAW   OF   BUILDING    ASSOCIATIONS.   [CH.   XVIII. 

fraud  which  caused  the  insolvency?  It  is  not  a  mere  set-off, 
or  a  counter-claim  by  reason  of  simple  liability  of  the  corpo- 
ration,  but  it  is  a  claim  to  come  in  on  the  remnant  of  the  cor- 
porate effects,  constituting  a  fund  to  be  distributed  justly  upon 
the  evidence.  He  assisted  by  fraud  to  reduce  the  association 
to  insolvency,  and  thereby  to  bring  the  wreck  of  its  fortunes 
into  distribution,  and  now  he  seeks  to  put  in  his  hand,  and 
withdraw  from  this  fund  the  very  money  he  gave  to  carry 
out  the  fraud.  Every  principle  of  justice  requires  him  to  be 
postponed  until  the  stockholders,  whom  he  defrauded,  are 
satisfied.  Nor  can  we  see  that  the  difference  of  time  in  mak- 
ing the  deposits,  which  created  the  stockholders  depositors, 
changes  the  result."  The  question  whether  the  members 
claiming  to  be  preferred  to  him  had  ever  received  any  bene- 
fit in  the  shape  of  dividends,  or  not,  is  immaterial,  as  affect- 
ing their  right  to  be  preferred.  He  has  no  merit  to  demand 
an  investigation  and  analysis  of  the  relations  of  the  prior  and 
subsequent  stockholders,  so  as  to  distribute  the  money  with 
a  view  to,  and  the  effect  of,  equalizing  the  various  claims. 
These  dividends  are  no  compensation  for  the  fraud  which 
continued  for  months,  and  ended  in  the  ruin  of  the  associa- 
tion. Even  if  he  were  claiming  the  identical  money  he  had 
put  in,  the  principle  that,  '  if  one  unlawfully  mixes  his 
goods  with  mine,  so  that  I  cannot  distinguish  his,  he  must 
suffer,  not  I,'  would  debar  him.  But  his  claim  is  to  take  out 
of  the  whole  estate  a  debt  which  he,  as  trustee  and  guardian 
of  the  stockholders'  interests,  contracted  with  himself.  It 
would  be  most  difficult  to  settle  the  equities  of  prior  and  sub- 
sequent stockholders  as  they  existed  at  the  time  the  assign- 
ment was  made.  Nor  will  the  court  attempt  so  to  do,  but 
will  postpone  his  claim  until  all  the  stockholders,  without 
respect  to  the  time  of  their  becoming  such,  are  fully  satis- 
fied.1 

Persons  Entitled  to  Ask  for  Appointment  of  Receiver. 

§  488.  Whilst  the  propriety  of  a  court  of  equity,  assum- 
ing to  protect  the  interests  of  all  claimants  upon  a  building 
association  which  is  shown  to  be  insolvent,  by  putting  a  re- 

1  Kisterbock's  App.  (In  re  Estate  of  the  Premium  Loan  Association), 
61  Pa.  St.  483. 


§  488.]     DISSOLUTION  AND   EFFECTS  OF  DISSOLUTION.  493 

ceiver  in  charge  of  its  property,  in  order  "  by  a  cautious  and 
prudent  policy  to  wind  up  the  affairs  of  the  concern,"  appears 
never  to  have  been  questioned ;  the  insolvency  of  a  building 
association  is  itself  a  peculiar  thing.  As  intimated  by  Ludlow, 
P.  J.,1  the  number  and  extent  of  outside  creditors  of  a  build- 
ing association  are  necessarily  limited.  It  would,  therefore, 
be  scarcely  conceivable  that  the  assets  of  a  building  associa- 
tion should  shrink  in  so  remarkable  a  manner  as  to  leave  such 
claimants  in  a  position  of  inability  to  reimburse  themselves 
by  process  of  law.  No  case,  it  is  believed,  has  occurred  in 
which  this  was  the  ground  of  a  successful  application  for  the 
appointment  of  a  receiver.  On  the  contrary,  it  has  been  re- 
peatedly asserted  by  the  courts  that  the  application  must  pro- 
ceed from  persons  interested  and  suing  as  members.  It  is 
the  inability  of  the  building  association,  not  to  pay  its  outside 
debts  (for  that  does  not  seem  to  have  ever  occurred,  and,  in 
the  nature  of  things  can  scarcely  be  thought  of),  but  to  sat- 
isfy the  demands  of  its  own  members,  that  has  been  recog- 
nized as  an  insolvency.  It  has  been  held  in  England  that  an 
order  to  wind  up  a  building  association,  whose  rules  do  not 
give  it  express  power  to  borrow,  may  be  obtained  upon  the 
petition  of  a  person,  who,  under  the  rules  of  the  society,  has 
deposited  money,  with  a  view  of  becoming  a  shareholder,  but, 
before  becoming  one,  has  given  proper  notice  to  withdraw  the 
money,  and  been  unable  to  obtain  it.  But  such  petition  must 
not  be  a  mere  creditor's  petition.  It  must  express  that  the 
petitioner  is  a  creditor  in  respect  of  money  advanced  by  him 
as  a  member  of  the  society,  which  he  has  given  notice  to  with- 
draw.2 And  in  Pennsylvania,  the  court  refused  to  take  the 
action  prayed  for — viz. ;  dissolution — in  the  petition  tiled  by 
a  shareholder,  who  was  also  a  creditor,  in  the  capacity  of 

1  In  re  Assigned  Estate  National  Ch.  738;  20  W.  R.  935;  27  L.  T.,  N. 

Savings,  Loan  and  Building  Asso-  8.  638,  showing  that  a  withdrawing 

ciation,  9  W.  N.  C.  (Pa.)  79;  ante,  member's  petition  for  a  winding- 

§  485.  up  order  under  the  statute  will  not 

9  In  re  Queen's  Benefit  Building  be  granted  where  the  society  is  per- 

Society,  4  L.  J.,  Ch.  881;  2  L.  T.,  fectly  solvent,  but  requires  time  to 

N.  S.  346;  19  W.  R  597,  762;  L.  R,  realize  on  its  assets  in  order  to  sat- 

6  Ch.  815.  And  see,  In  re  Planet  isfy  him.  See  ante,  §§  138-143,  as 

Benefit  Building  and  Investment  to  stay  of  execution  in  similar  cases 

Society,  L.  R,  14  Eq.  441 ;  41  L.  J.,  in  America. 


494  mi;  LAW  OP  HUILDINU  ASSOCIATIONS.  [CH.  XVIIL 

<-ivditor,  although  the  building  association  was  insolvent   and 
hud  no  responsible  officers.1 

§  489.  In  England,  a  petition  was  presented  by  four  mem- 
bers of  a  permanent  building  association,  whose  shares  had 
i.n  11  advanced  on  mortgage,  for  winding  up  the  society.  One 
of  the  rules  of  the  society  gave  the  trustees  power  to  borrow 
any  money  that  might  be  necessary  for  the  purposes  of  the 
society.  Under  this  power,  considerable  sums  had  been  bor- 
rowed on  deposit,  and  some  of  the  depositors  pressed  for  their 
money,  which  the  society  was  unable  to  pay  without  calling 
on  its  members.  The  committee  of  the  society  had  according- 
ly proposed  that  the  business  should  be  transferred  to  another 
company  and  the  society  wound  up,  to  which  the  great  ma- 
jority of  the  shareholders  had  agreed.  After  the  petition  was 
presented,  the  creditors  of  the  society  executed  a  release  to 
the  petitioners  from  their  debts,  and  the  committee  offered  to 
effect  a  transfer  of  their  mortgages.  It  was  held,  that,  as  the 
release  of  the  petitioners  operated  as  a  release  to  the  whole 
society,  the  petitioners  were  under  no  direct  or  indirect  lia- 
bility in  respect  of  the  existing  debts ;  that,  the  society  being 
one  of  unlimited  liability,  and  the  rule  as  to  borrowing  ultra 
vires,  the  insolvency  was  not  proved  ;  and  that  the  interest 
which  the  petitioners  had  in  the  profits,  as  advanced  mem- 
bers, was  not  sufficient  to  induce  the  court  to  make  a  winding- 
up  order  contrary  to  the  wishes  of  the  great  majority  of  the 
other  members.  The  petition  was,  therefore,  dismissed  with- 
out costs.* 

Right  of  Members  to  Ask  Interposition  of  Court  to  Wind  up  Society 
When  Shares  at  Par. 

§  490.  A  case,  peculiar  to  building  associations,  upon  the 
occurrence  of  which  its  members  have  a  standing  in  a  court 
of  equity,  in  asking  for  the  appointment  of  a  receiver  for  the 
purpose  of  winding  up  the  affairs  of  the  association,  or  series, 

1  Gormerly  v    The    Port    Rich-  Association,  93  Pa.  St.  308.     And 

mond  Building  and  Loan  Associa-  see  ante,  §  145,  and  post,  §§  490- 

tion  et  al.,  8  W.  N.  C.  (Pa.)  11.  491. 

But  a  member  may  compel  settle-  *  In  re  Professional,  Commercial, 

ment  of  an  expired  series  by  bill  and  Industrial  Benefit  Building  So 

in    equity.      O'Rourke    v.     West  ciety,  L.  R.,  6  Cb.  856;  25  L.  T., 

Pennsylvania  Loan   and   Building  N.  S.  397;  19  W.  R.  1153. 


§  491.]     DISSOLUTION    AND   EFFECTS   OF   DISSOLUTION.  4'J5 

arises,  where,  in  point  of  fact,  the  time  lias  arrived  when  the 
shares,  owing  to  the  past  accumulations  of  the  business,  are 
worth  the  stipulated  par  value  fixed  by  the  charter.  Theo- 
retically, the  moment  that  time  arrives,  the  society,  if  a 
terminating  one,  ceases  to  exist  as  a  business-doing  corpora- 
tion, or  for  any  purpose  except  that  of  settling  its  accounts; l 
or,  if  a  serial  one,  the  series  to  which  the  stock  belongs  is  at 
once  wound  up.  But  there  may  be  grave  difficulties  in  the 
way  of  recognizing  the  exact  period  when  this  consummation 
takes  place,  and  of  making  it  appear  to  general  satisfaction 
that  it  has  been  accomplished."  The  precise  amount  and 
species  of  the  society's  investments  are,  as  a  rule,  known  only 
to  the  officers,  and  the  value  of  the  assets,  whether  in  real  or 
personal  estate,  is  at  all  times  variable  within  a  considerable 
margin.  The  annual  valuation  of  the  shares,  oftentimes  re- 
quired by  statute,  furnishes  a  guide  only  to  a  certain  degree  of 
accuracy  in  the  computation.  A  member,  therefore,  who  has 
reason  to  believe  that  the  time  for  winding-up  is  at  hand,  has 
no  resort  but  a  court  of  equity  in  order  to  establish  the  fact, 
and  compel  settlement  by  the  officers  to  whose  discretion  and 
judgment  the  matter  is  ordinarily  left.  The  right  to  invoke 
such  aid  has  repeatedly  been  recognized,  and  never  denied,  as 
residing  in  a  member.3 

§  491.  But  this  is  a  right  which  is  conceded  to  none  but 
members.  Where  a  borrower,  therefore,  from  a  building  asso- 
ciation, who,  up  to  the  time  of  taking  the  loan,  had  been  a 
member,  but,  by  the  terms  of  his  contract,  had  ceased  to  be 
such,  and  become  merely  a  debtor  for  a  fixed  sum  repayable 
by  installments  until  they  amounted  to  that  sum  ;  and,  believ- 
ing that  the  period  had  arrived  when  the  shares  could  be  paid 
out  by  the  society  at  their  par  value,  but  that  the  officers  were 
redeeming  certain  shares  at  such  a  rate  as  to  delay  the  time  of 
his  discharge,  presented  his  bill  for  an  injunction  upon  the 

1  Hagerman  et  al.    v.  The  Ohio  808:    Bowker  v.   Mill  River  Loan 

Building  and  Savings  Association,  Fund  Association,  7  Allen  (Mass.), 

25  Ohio  St.  186.     Ante,  §  473.  100;  Lister  v.  Log  Cabin  Building 

*  See  ante,  §§  128-129.  Association,   38  Md.   115;   Eclelyn 

8  See  O'Rourke  v.  West  Pennsyl-  et  al.  v.  Pascoe  et  al.,  22  Grattan 

vauia  Loan  and  Building  Associa-  (Va.),  826. 
tiou,  8  W.  N.  C.  176;  93  Pa.   St. 


496  THE   LAW   OF   BUILDING    ASSOCIATIONS.   [CH.  XVIII. 

officers  of  the  society,  the  appointment  of  a  receiver,  and 
winding-lip  of  the  concern:  the  hill  was  properly  dismissed.1 
I  Icing  .simply  a  debtor,  bound  to  pay  a  certain  amount  of 
money,  he  could  not  be  discharged  until  that  was  paid,  and  as 
he  had  ceased  to  be  a  member,  the  continuance  of  the  society 
for  a  greater  or  lesser  time  was  not  a  matter  wherein  he  could 
have  any  interest.1 

Financial  Condition  •which  must  be  Shown  to  Exist.     Mortgages  of 
Members  not  Assets  for  Winding  Up. 

§  492.  An  application  looking  towards  a  compulsory  wind- 
ing-up  of  the  society,  on  the  ground  of  the  accomplishment 
of  its  objects,  must  show  that  the  assets  of  the  building  as- 
sociation are  sufficient  to  pay,  over  and  above  all  losses  and 
expenses,  and  after  cancellation  of  the  advanced  members' 
securities,  to  every  unadvanced  member  the  par  value  of  his 
shares,  according  to  the  original  scheme.8  In  ascertaining 
the  sufficiency  of  the  corporate  assets  for  this  purpose,  it  is 
clear  and  has  been  expressly  decided  that  the  mortgages  held 
against  advanced  members  must  not  be  counted  as  assets.4 
This  rule  applies  equally  whether  the  mortgages  be  given 
merely  for  the  payment  of  installments,  etc.,  or  for  the  pay- 
ment, absolutely,  of  a  definite  sum  of  money;  whether  the 
term  of  the  encumbrance  be  co-extensive  with  that  of  the 
building  association,  or  limited  to  any  period  short  of  the 
same:  There  is  no  loan  that  may  be  legitimately  made  by 
the  building  association  and  properly  called  a  building  associa- 
tion loan,  which,  no  matter  what  are  its  formal  reservations 
designed  for  convenience  and  safety  in  any  emergency,  is  not 
intended  to  run  over  the  entire  course  of  the  society's  exist- 
ence.* These  mortgages  cannot,  therefore,  be  treated  as 
assets,  to  be  calculated  and  applied,  with  the  sums  from  the 
net  revenues,  to  the  satisfaction  of  the  claims  of  the  unpaid 
shareholders.  They  cannot  be  used  for  that  purpose,  nor  has 
the  building  association  any  authority  to  collect  and  apply  the 

1   Bowker   v.    Mill    River    Loan  ing  Association,  38  Md.  115;   and 

Fund  Association,  7  Allen  (Mass.),  see  ante,  §  440. 
100.  4  Lister  «.  The  Log  Cabin  Build- 

*  Ib.  ing  Association,  vbi  supra. 

8  Lister  v.  The  Log  Cabin  Build-         6  See  ante,  §§  330-332. 


£    $2.]     DISSOLUTION    AND    EFFECTS    OF    DISSOLUTION.  497 

muieys  secured  by  these  mortgages,  to  the  liquidation  of  the 
claims  of  the  unpaid  members.  Whilst  they  exist  and  are  of 
binding  efficacy,  they  are  only  a  source  of  revenue,  and  as 
such  constitute  an  efficient  part  of  the  available  assets  of  the 
building  association.  But  the  profits  which  enable  it  to  pay 
to  the  shareholders  who  are  unadvanced,  the  full  value  of 
their  sha/-es,  also  operate  to  discharge  the  mortgagors.  When 
the  formw  are  ready  to  be  paid,  the  latter  are  ready  to  be  re- 
leased; but  the  payment  of  the  one,  and  the  release  of  the 
other,  depend  upon  the  sufficiency  of  the  general  revenues 
and  assets  o2  the  concern,  outside  and  beyond  these  members' 
mortgages.  Thus,  if  the  stock  of  a  building  association  con- 
sist of  1000  /hares  at  $200  each,  and  500  shares  have  been 
advanced  or  prepaid,  the  building  association  holding,  from 
the  owners  01  borrowers,  securities  to  the  nominal  amount  of 
$100,000  therefor,  so  that  the  amount  necessary  to  wind  up, 
over  all  expensus,  losses,  etc.,  would  be  $100,000, — supposing 
the  amount  of  ca^h  in  the  treasury,  or  of  securities  and  invest- 
ments representing  cash,  to  be,  in  addition  to  the  above  secur- 
ities, worth  $50,000,  after  deduction  of  all  losses,  expenses, 
etc.:  then  the  assets  of  the  concern,  for  distribution,  or  wind- 
ing-up,  in  such  ca«e,  would  not  be  $150,000,  but  mere- 
ly $50,000.  Thest  $50,000  would  represent  (1)  all  the 
gains,  by  premiums,  forfeitures,  investments,  etc.,  made  by 
the  building  association  during  its  operation;  (2)  all  the  in- 
terest paid  by  borrowing,  or  advanced  members;  (3)  all  the 
payments  made  by  them  (so  far  as  not  reloaned  to  members) 
on  account  of  the  principal  of  their  advancements,  or  applica- 
ble to  it ;  (4)  all  the  stock-payments  by  non-borrowers,  not  de- 
voted to  the  advancement  of  other  members  (*'.  6.,  in  the  light 
of  the  winding-up  situation,  to  the  redemption  of  stock) — in 
fact,  the  sum  total  of  the  available  assets.  The  securities, 
nominally  aggregating  $100,000,  held  against  members,  inu.-i 
be,  if  the  building  association  is  ready  to  be  wound  up,  not 
collected,  but  cancelled.  They  are  not  assets  for  the  purpose 
of  realizing  on  them,  merely  for  that  of  deriving  revenue 
from  them  whilst  the  building  association  is  running.  When 
the  time  for  winding  up  is  at  hand,  their  function  is  to  wipe 
out  the  corresponding  amount  of  stock,  upon  which  they  li;i\v 
taken.  The  balance  of  the  stock  c«>n>titutos  tlie  building 


498  THE   LAW   OP   BUILDING    ASSOCIATIONS.   [CH.  XVIII. 

association's  liabilities,  together  with  other  debts  and  expenses, 
and  whatever  other  securities  or  cash  may  be  in  the  treasury, 
represent  the  assets  which  are  to  be  counted  on  as  available 
for  the  payment  of  the  unadvanced  stock,  and  extinguishment 
of  other  liabilities  of  the  building  association.1 

Effect  of  Expiration  of  Charter  Limitation  upon  Society's  Corporate 
Existence. 

§  493.  The  consequences  of  a  dissolution  of  a  building 
association,  either  by  decree  of  court,  or  by  expiration  of  its 
charter,  or  by  loss  of  its  membership,  as  well  as  of  the  judi- 
cial transfer  of  its  affairs  into  the  hands  of  a  receiver,  and  of 
such  voluntary  action  on  the  part  of  its  members  as  amounts 
to  an  abandonment  or  surrender  of  its  franchises,  are  to  be 
considered,  with  reference  to  these  organizations,  in  their 
effect  upon  debtors  and  creditors,  and  upon  members  in  par- 
ticular. When  a  building  association  has  reached  that  period 
in  its  history,  when,  according  to  the  provisions  of  its  charter, 
it  is  wound  up ;  that  is  to  say,  when  its  accumulated  assets 
have  arrived  at  the  aggregate  amount  necessary  to  pay  to  each 
unadvanced  member  the  full  fixed  value  of  the  shares  he 
holds,  after  paying  all  outstanding  liabilities  of  the  associa- 
tion, and  cancelling  the  obligations  given  by  advanced  mem- 
bers :  it  ceases,  as  has  been  seen,  ipso facto,  to  be  a  corporation, 
except  for  the  purposes  of  winding  up  its  affairs.7 

§  494.  The  statutes,  under  which  these  associations  are 
incorporated,  sometimes  contain  a  provision  empowering  the 
building  association  about  to  be  wound  up  to  elect  officers,  to 
be  charged  with  the  duty  of  winding  up  the  concern,  or  cast- 
ing that  burden  upon  the  officers  last  elected  or  their  sur- 
vivors, and  giving  the  building  association,  or  those  charged 
with  the  settlement  of  its  affairs,  the  right  to  carry  on  liti^ii- 
tion  already  instituted,  and  to  bring  and  maintain  suits  in  the 
corporate  name,  on  all  judgments,  bonds,  mortgages,  notes,  or 
other  evidences  of  indebtedness  or  obligations  due  the  corpo- 

1  See  Lister  v.  Log  Cabin  Build-  the  stock  is  upon  the  defendant 

ing  Association,  38  Md.  115.  alleging  it  when  sued  by  the  asso- 

9  Hagerman  et  al.  v.  The  Ohio  ciation  for  his  indebtedness,  under 

Building  and  Savings  Association,  a  plea  of  payment.  "Watkins  v. 

25  Ohio  St.  186.  Ante,  §  473.  The  Workingmen's,  etc.,  Association, 

burden  of  proof  of  the  maturity  of  9?  Pa.  St.  514. 


§  495.]     DISSOLUTION   AND    EFFECTS   OF   DISSOLUTION.  499 

ration,  or  for  monthly  dues,  interest,  or  any  demand  owing 
to  it,  and  proceed  to  judgment  and  execution,  notwithstand- 
ing the  expiration  of  the  charter ;  and  to  sell  and  make  title 
to  any  real  estate  of  which  the  association  was  seized,  and 
which  remained  upon  its  hands  undisposed  of  at  the  time  of 
the  charter's  expiration.  And,  in  the  absence  of  any  statutory 
provisions  to  that  effect,  the  general  powers  of  supervision 
and  control  with  which  courts  of  equity  are  invested  in 
respect  of  corporations,  afford  a  safe  and  perfect  means  of 
doing  of  justice  to  all  parties,  by  the  appointment  of  a  re- 
ceiver ;  even  independently  of  the  expedient  which  building 
associations  have  it  in  their  own  hands  to  adopt,  of  conveying 
to  trustees  all  their  assets,  before  dissolution,  for  the  benefit 
of  members  and  creditors  in  interest. 

Subsisting  Liabilities  of  Society. 

§  495.  Whatever  liabilities  the  society  has  lawfully  in- 
curred are,  of  course,  protected  upon  dissolution.1  A  mort- 
gage given  by  a  building  association  will  not  be  avoided  by 
the  subsequent  expiration  of  the  society,  where  the  latter 
transferred  its  property  to  the  hands  of  an  assignee,  or  trus- 
tee, abandoning  its  corporate  existence.  Such  an  assignee 
may  defend  in  an  action  upon  the  mortgage,  but  he  will  not 
be  permitted  to  set  up  the  dissolution  of  the  society  by  expi- 
ration of  its  charter  as  a  defence  to  the  same.  If  the  mortgagee 
in  such  a  case  entered  on  the  land,  and  the  terre-tenant  were, 
as  the  general  assignee  of  the  building  association,  to  ask 
relief  from  chancery,  it  would  not  be  granted  except  upon 
the  terms  of  payment  of  the  principal  and  interest  of  the 
debt  in  full.  It  follows  conversely  that  the  mortgagee  would 
be  entitled  to  a  decree  of  sale  and  foreclosure  against  the 
terre-tenant.9  Where  the  land  is  granted  subject  to  a  mort- 

1  See  Field,    Corp.,  §§  491-492,  supplies,  under  the  statute,  the  pro- 

and  cases  there  cited.  ceeding  in  equity.     It  differs  from 

9  See  Kisterbock  v.  Building  As-  a  proceeding  in  rem  only  in  being 

sociation,  7  Phila.  (Pa.)  185.     It  is  against  the  title  of  the  mortgagor  in 

there  said,  that,  this  equity  being  the  thing,  as  distinguished  from  the 

indisputable,    there    is    no    reason  thing  itself,  and  the  grantee  stands 

why  it  should  not  be  enforced  in  a  in    no    better    position    than    the 

proceeding  of  scire  facias  sur  mort-  grantor. 
gage,  where,  as  in  Pennsylvania,  it 


500  THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVIII, 

gage,  the  grantee  stands  in  the  shoes  of  the  grantor,  and  is,  to- 
the  extent  of  his  interest  in  the  land,  primarily  liable  for  the 
payment  of  the  mortgage  debt.  Hence  it  does  not  lie  in  his 
mouth  to  object  that  the  mortgage  was  executed  by  a  body 
corporate  that  has  ceased  to  exist.  Such  a  defence  would,  if 
necessary,  be  restrained  by  injunction.1  But  a  judgment 
rendered  in  an  action  against  a  corporation,  which  has,  pend- 
ing the  action,  become  dissolved  by  expiration  of  its  charter, 
is  void,  unless  the  action  has  been  continued  against  the 
proper  parties.* 

Effect  of  Dissolution  upon  Obligations  of  Borrowing  Members.    Ex- 
ceptions. 

§  496.  The  effect  of  the  dissolution  of  a  building  associa- 
tion upon  its  members  is,  to  stop,  at  once,  any  liability  for 
further  regular  stock-payments.  And  this  applies  equally 
whether  such  members  be  merely  investors  or  also  bor- 
rowers. "  The  liability  to  pay  monthly  dues,  or  fines,  or 
interest  on  the  amount  advanced,  cannot  extend  beyond  the 
existence  of  the  association." s  And  the  reason  is  obvious. 
The  advance  made  to  the  member  by  the  building  association 
is  not  a  naked  loan  of  money,  to  be  returned  dollar  for 
dollar.4  Part  of  the  consideration  of  the  contract  which  the 
borrower  entered  into  upon  receiving  the  advance,  was  the 
interest  he  retained  as  a  member  in  the  accumulations  of  its 
business,  and  the  prospect,  by  means  of  this  interest,  to  be 
enabled,  not  only  to  lay  by,  through  a  long  period  of  time, 
small  sums  towards  the  day  of  repayment,  but  also  to  enjoy, 
during  that  period,  the  profits  which  such  small  sums  would, 
when  the  course  of  the  society  was  completed,  have  earned, 
making  his  credit  sufficient  in  bulk,  to  be  set  off  against  hi& 
liability  to  the  association,  and  extinguish  the  same.  The 
length  of  time  thus  allowed  him  for  the  extinguishment  of 
his  debt,  and  the  additions,  with  the  aid  of  which  his  period- 

1  Kisterbock  v.  Building  Associa-  8  Ante,  §  270. 

tion,   ubi   supra.    It  is  intimated,  3  Cook  v.  Kent,   105  Mass.  346; 

however,  that   the  case  of  a  pur-  cit.    in    support,    Bowker   v.   Mil! 

chaser  who  had  paid  full  value  for  River   Loan    Fund  Association,   1 

the  land,  irrespectively,  and  with-  Allen  (Mass.),  100. 

out  making  account  of  the  mort-  4  See  ante,  §§  326-337;  354-357. 
gage,  might  be  a  different  one. 


f  496.]     DISSOLUTION   AND   EFFECTS   OF   DISSOLUTION.  501 

ical  payments,  by  being  constantly  employed  in  producing 
revenues,  (these  revenues  again  being  invested,  and  so  on,  ad 
infinitum,}  would  swell  to  the  sum  to  talof  his  obligations  to 
the  society, — are  material  elements  in  preventing  his  under- 
taking as  to  premiums,  fines,  etc.,  from  proving  extremely 
oppressive,  if  not  ruinous.  The  mode  of  payment,  in  other 
words,  is  an  essential  part  of  the  contract.  The  dissolution 
of  the  building  association  necessarily  puts  an  end,  not  only 
to  its  capacity  to  receive,  from  time  to  time,  his  small  pay- 
ments, but  also  to  the  possibility  of  their  being  turned  to 
account,  for  his  benefit,  by  means  of  the  system  of  investment 
and  reinvestment  peculiar  to  the  building  association  scheme. 
The  one  feature  which  has  made  his  undertaking  bearable, 
and  in  reliance  upon  which  he  has  been  induced  to  assume  its 
obligations,  is  thus  taken  away,  and  it  follows  as  an  inevitable 
consequence  that  he  cannot  be  held  to  its  precise  terms.  His 
duty  to  make  regular  stock-payments,  a  duty  incident  to 
membership  only,  ceases;  for  the  stock  itself  is  destroyed, 
there  being  no  longer  a  corporation  as  whose  stock  it  can 
figure,  and  the  membership  dies  with  the  corporation.  So 
far  as  the  mortgage  was  given  to  ensure  the  performance  of 
this  membership  duty,  the  obligation  is  abrogated  by  the 
destruction  of  the  stock  and  the  society.  The  imposition  of 
fines,  a  species  of  liquidated  damages,  due  the  society,  under 
its  system  of  mutuality,  for  the  neglect  of  a  membership 
duty,1  must  of  necessity  fall  away  when  the  membership  is 
gone ;  when  there  is  none  who  can  justly  claim  the  damages ; 
and  when  their  exaction  would  be  nothing  more  nor  less 
than  the  enforcement  of  penalties  not  countenanced  by  the 
law."  The  agreement  to  pay  a  premium  for  the  loan,  justi- 
fied upon  the  basis  of  strict  mutuality,  and  bearable  by  reason 
of  the  length  of  time  allowed  for  its  liquidation,  and  by  the 
fact  that  it  would,  according  to  the  status  and  intent  of  the 
contract  when  entered  into,  be,  in  part,  made  up  by  profits 
upon  the  stock-payments  and  interest  discharged  by  the  bor- 
rower during  the  projected  continuance  of  the  association,  as 
well  as  by  similar  payments  made  by  other  borrowers  during 
the  like  period,  and  the  gains  and  accumulations  of  the  entire 
corporate  business  to  the  day  of  its  contemplated  termina- 
1  Sec  ante,  g§  401-103.  *  See  ante,  §§  402-403. 


502 


THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVIII. 


tion, — must,  when  that  mutuality  is  taken  away,  and  all  the 
other  elements  embraced  in  the  terms  of  its  assumption  re- 
moved, fail  for  want  of  a  proper  consideration.  The  duty 
of  the  borrower  as  a  member  to  contribute  to  the  debts 
and  losses  of  the  corporation,  has  nothing  to  do  with  this 
matter.1  That  arises  on  other  grounds,  and  on  considerations 
independent  of  those  relating  to  his  indebtedness :  but  it  is  as 
between  him  and  his  associates  only  that  the  question  of  the 
extent  of  his  liability  as  a  borrower  must  be  determined  ;  and 
there  is  no  reason  why  he  should  be  held  to  his  whole  bar- 
gain while  they  escape  part  of  theirs.  He  is  to  be  charged, 
therefore,  only  with  the  amount  he  has  actually  received 
with  legal  interest,  and  credited  with  all  his  payments,  upon 
stock  and  interest,  upon  the  principle  of  partial  payments.* 
This  doctrine  is  fully  illustrated,  in  theory  and  application, 
in  a  series  of  cases  in  which  it  has  been  recognized. 


1  It  is,  of  course,  improper,  to 
charge  the  advanced  members  with 
the  making  up  of  losses  for  the 
benefit  of  the  unadvanced.  In 
Low  Street  Building  Association, 
No.  6,  etc.,  v.  Zucker,  48  Md.  448 
(454),  where  such  an  attempt  seems 
to  have  been  made,  Alvey,  J., 
says :  "  As  to  the  charge  made  .  .  . 
for  losses  sustained  by  the  associa- 
tion, and  apportioned  to  each  share 
of  the  stock,  by  estimation,  we  can 
perceive  no  warrant  for  it.  The 
covenant  in  the  mortgage  does  not 
justify  it  in  terms,  nor  does  it 
authorize  the  charge  by  any  fair 
implication.  The  covenant  is  to 
pay  weekly  dues  and  fines  until 
such  time  as  the  association  might 
have  a  sufficient  fund  to  pay  all 
the  holders  of  unredeemed  shares 
of  stock,  the  [par  value  thereof,] 
clear  of  all  losses  and  liabilities. 
This,  of  course,  contemplated  the 
continued  existence  and  operation 
of  the  association,  and  that  it 
should  terminate  in  the  regular 
course  and  mode  as  provided  in  the 
articles  of  association.  It  was  only 


in  that  event  that  the  mortgagors 
could  be  required,  by  the  terms  of 
this  covenant,  to  contribute  to 
losses  and  liabilities  of  the  associa- 
tion, and  then  only  by  the  pro- 
longed or  extended  payment  of  the 
weekly  dues.  Losses  by  the  asso- 
ciation are  chargeable,  by  virtue  of 
this  covenant,  and  in  no  other 
way."  It  is  quite  clear  that,  in 
such  a  case,  whatever  losses  or 
liabilities  may  be  chargeable  against 
the  society  must  be  made  good  out 
of  its  assets:  if  these  are  insuffi- 
cient, the  duty  of  contribution 
reaches  all  members,  as  such,  equal- 
ly, whether  they  be  borrowers  or 
investors.  See  ante,  §§  104,  106, 
110. 

8  See  Cook  v.  Kent,  105  Mass. 
246;  cit.  Bowker  v.  Mill  River  Loan 
Fund  Association,  7  Allen  (Mass.), 
100;  Windsor  and  Applegarth  «. 
Bandel  et  al.,  40 Md.  172;  14  Amer. 
Law  Reg.,  N.  S.  250;  The  City  Loan 
and  Building  Association  of  Augus- 
ta et  al.  v.  Goodrich  et  al.,  48  Ga. 
445;  The  Low  Street  Building  As- 
sociatiou  No.  6,  etc.,  v.  Zucker,  48 


§  497.]     DISSOLUTION   AND   EFFECTS   OF   DISSOLUTION.  503 

§  497.  Thus,  in  a  case  arising  in  Massachusetts,  a  building 
association,  duly  incorporated,  was  governed  by  articles  of  as- 
sociation which  provided,  inter  alia,  that  borrowers  should 
upon  receiving  their  advancements,  cease  to  be  members,  but 
give  bond  and  mortgage  for  the  payment,  besides  interest 
monthly,  and  fines,  of  the  sum  advanced,  namely,  monthly 
dues,  "  to  be  applied  in  liquidation  of  the  principal  sum ;"  ' 
that  a  borrower  might  redeem  before  dissolution  of  the 
society  upon  application  to,  and  approval  by,  the  officers ;  that 
neither  interest  nor  fines  should  be  deducted  in  computing  the 
amount  due  on  the  mortgage ;  that  the  entries  in  the  books 
of  the  secretary  should  be  prima  facie  evidence  against  any 
member,  but  that  an  appeal  might  be  had  to  a  meeting  of  the 
association,  of  which  twenty-five  should  be  a  quorum ;  and 
for  the  election,  duties,  and  removal  of  officers.  The  secre- 
tary of  the  association  purchased  and  took  assignments  to 
himself  of  all  the  bonds,  mortgages,  and  assets  of  the  associa- 
tion, and  of  all  the  unredeemed  shares.  This,  it  was  held, 
amounted  to  a  complete  suspension,  if  not  a  final  dissolution, 
of  the  society  as  a  corporation  by  the  unanimous  consent  of 
all  its  members,  and  the  liability  to  pay  monthly  dues,  or 
fines,  or  interest  on  the  amount  advanced  ceased  with  it. 
There  being  no  longer  a  quorum  of  members  necessary  to  the 
transaction  of  any  business ;  no  possibility  of  appealing  to  a 
meeting  of  the  association  from  the  entries  of  the  secretary, 
by  the  rules  made  prima.  facie  evidence  against  members ;  no 
meetings  for  the  election  or  removal  of  officers  to  whom  the 
borrower  might  apply  for  the  redemption  of  his  land  from 
the  mortgage,  nor  for  any  other  corporate  object  or  purpose, — 
it  would  be  most  inequitable  to  oblige  one  party,  or  those 
holding,  by  assignment,  his  interest,  to  continue  to  make  the 
payments  required  of  him  by  his  contract,  while  the  other 
party  had  incapacitated  itself  from  carrying  out  the  provi- 
sions made  in  the  same  contract  for  ascertaining  the  extent  of 
the  mutual  obligations  of  the  parties,  and  for  securing  the 

Md.  448;  The  Peter's  Building  As-  certain  limited  attributes  of  mem- 

sociation  No.  5  of  Baltimore  City  v.  bership  were  reserved  to  borrower-; 

jaecksch,  51  Md.  198.  (as  see  passim).     The  principle  ap- 

1  Thus  giving  them  ;i  share  in  the  plies  d  fortiori,  where  the  nu-mljer- 

workings  of  the  concern.     Besides,  ship  continues  in  toto. 


504  THE   LAW   OF   BUILDING   ASSOCIATIONS.   [CU.  XVIII. 

performance  thereof  on  its  own  part.  It  was,  therefore,  held 
that  the  liability  to  pay  monthly  dues  and  fines  ceased  upon 
the  day  of  the  assignment  to  the  secretary,  and  that  an  ad- 
vanced member  was  entitled  to  redeem  his  mortgage  upon 
payment  of  the  amount  due  thereon,  with  interest,  to  the  time 
of  such  assignment.1 

§  498.  The  rule  is  more  clearly  laid  down  in  a  case  de- 
cided in  Maryland.  A  building  association  had  become  pre- 
maturely dissolved  by  the  withdrawal  of  members  takin<> 
their  money  with  them,  and  to  such  a  degree  crippling  the 
society  as  to  make  its  further  continuance  a  matter  of  impos- 
sibility,— a  case  of  dissolution,  in  effect,  by  the  loss  of  an  in- 
tegral portion  of  its  membership,  causing  a  breach  which 
could  not  be  repaired."  Upon  foreclosure  of  the  mortirauv^ 
held  by  the  building  association  against  members  whose 
shares  of  stock  had  been  redeemed  by  loans  or  advancements, 
the  rule  for  determining  the  true  amount  due  under  them 

o 

was  said  to  be,  to  allow  not  only  for  the  sums  paid  by  them  as 
periodical  dues,  but  also  for  what  they  had  paid  as  interest ; 
while  they  were  to  be  charged  with  interest  at  the  legal  rate 
per  annum  on  the  sums  advanced  by  the  building  association, 
and  so,  from  time  to  time,  on  the  balance  of  such  sums,  after 
deducting  therefrom  the  moneys  paid  by  them  for  periodical 
dues  and  interest.  On  the  payment  of  the  balance  due  on 
the  mortgages,  they  were  to  be  released.  "  By  the  dissolution 
of  the  society  before  the  period  originally  contemplated  and 
the  alteration  of  the  articles,  their  contract  is  at  an  end.  It 
is  impossible  for  them  to  perform  the  covenants  contained  in 
their  mortgages,  and  they  are  entitled  to  have  them  released 
upon  payment  of  the  sum  justly  due."  ! 

§  499.  It  must  be  observed  that  this  case  is  different  from 
one  in  which  the  embarrassment  of  the  building  association 
arises  from  a  mere  refusal  of  any  number  of  shareholders  tc 
continue  their  stock-payments.  This  may  tend  greatly  to  in- 
crease the  burden  of  the  borrower.  But  "  by  the  terms  of  his 
bond,  he  assumes  the  hazard  of  all  losses  sustained  by  the 

1  Cook  v.  Kent,  105  Mass.  246 ;  cit.  3  Windsor  and  Applegarth  v.  Ban 

Bowkcr  v.  Mill  River  Loan  Fund  del  et  al.,  40  Md.  172;  14  Amer. 

Association,  7  Allen  (Mass.),  100.  Law  Reg.,  N.  S.  250. 

"  See  ante,  §§  471^72. 


•§  500.]     DISSOLUTION    AND    EFFECTS   OF    DISSOLUTION.  505 

corporation  either  by  fraud,  accident,  or  the  defalcation  of  its 
members.  Every  shareholder  must  of  necessity  incur  that 
hazard.  He  cannot  escape  the  hazard,  nor  can  his  liability  to 
loss  be  diminished  by  entering  into  an  obligation  and  giving 
security  for  the  payment  of  his  dues  to  the  corporation." ' 
It  is  true  that  such  behavior  on  the  part  of  members  may 
throw  the  building  association  into  insolvency,  but  the  insol- 
vency of  a  corporation  does  not  of  itself  excuse  the  payment 
of  stock  subscriptions.8  And  hence  it  will  not  constitute,  by 
itself,  a  defence  of  which  any  particular  member  can  avail 
himself  when  sued  by  the  building  association  for  the  non- 
performance  of  his  undertakings.  To  do  this,  there  must  be 
a  dissolution,  a  cessation  of  the  building  association  to  exist  as 
a  corporation.  And  this,  it  is  said,  must  be  clearly  estab- 
lished, in  order  to  enable  a  person  to  escape  from  an  indebted- 
ness which  is  shown  to  exist.3  Insolvency  does  not  neces- 
sarily bring  it  about.  The  building  association's  corporate 
business  is  not  thereby  terminated.  Its  franchises  may  be 
uninterruptedly  carried  on,  though,  perhaps,  not  with  the  ad- 
vantages contemplated  in  the  inception  of  the  enterprise,  and 
the  recusants  may  be  compelled  to  pay  the  penalty  of  their 
disloyalty.4 

§  500.  So,  too,  where  a  building  association  by  agreement 
had  suspended  its  operations  until  its  mortgage  securities, 
which  were  in  process  of  collection,  could  be  realized  on,  and 

1  Hoboken  Building  Association  made  by  the  society,  for  the  pur- 
«.  Martin,  2  Beas.  (N.  J.)  428.    The  pose  of  winding  up  its    business 
court,  in  this  case,  says  that  "the  with  borrowers  who  repaid  volun- 
defeudant's  obligation  to  pay  is  ab-  tarily.     But  see  Watkins  v.  Work- 
solute."      But   it    also    says    that,  ingmen's  Building  and  Loan  Asso- 
where  the  fact  of  indebtedness  is  ciation,  10  "W.  N.  C.  (Pa.)  413;  38 
established,  a  very  clear  case  should  Leg.    Int.    333;    97    Pa.    St.    514; 
be  made  out  to  enable  the  debtor  to  where  one  who  repudiated    terms 
escape  liability,  on  the  ground  that  offered    for   voluntary    repayment 
the  corporation  had  ceased  to  exist,  was,  when  sued,  not  held  entitled 
— thus  recognizing  the  dissolution  to  claim  their  benefit, 
of  the  society,  if  established,  to  be  *  Angell    and    Ames,    Corp.,    § 
an  element  in  abrogating  the  con-  523;  cit.  Dill  v.  Wabash  Valley  R. 
tract.    Besides,  the  borrower  was,  Co.,  21  111.  91. 
in  fact,  held  entitled  to  redeem  his  *  Hoboken  Building   Association 
mortgage  upon  payment  of  what  v.  Martin,  ubi  supra. 
he  had  actually  received  with  legal  *  See  ante,  §§  86-102,  451. 
interest,  this  being  the  arrangement 


506  THE  LAW   OF   BUILDING   ASSOCIATIONS.   [CH.  XVIII. 

in  the  mean  time  the  farther  payment  of  monthly  dues  of  its 
members,  as  required  by  charter  and  by-laws,  was  to  be  dis- 
pensed with  and  suspended,  until  a  reasonable  time  was  had 
to  collect  the  securities;  but,  if  said  securities  should  not 
yield  enough  money  to  close  up  the  building  association  as 
contemplated  by  its  charter,  then  the  payment  of  monthly 
dues  was  to  be  resumed  at  such  time  as  the  Board  of  Directors 
would  determine,  upon  reasonable  notice  to  the  members :  it 
was  held  that  a  borrowing  member  was  bound  to  pay  interest 
to  the  building  association  upon  the  balance  of  his  indebted- 
ness to  it  at  the  date  of  the  agreement,  unless  he  paid  it  over 
at  once.1  Here,  too,  there  was  no  dissolution. 

§  501.  On  the  other  hand,  the  principle  is  again  recog- 
nized in  the  following  cases.  The  stockholders  of  a  building 
association  agreed  unanimously,  at  a  period  long  antecedent 
to  the  time,  when,  by  the  rules  of  the  company,  it  would 
close,  to  cease  operations  and  settle  their  mutual  relations  on 
principles  of  equity.  At  the  same  meeting  a  majority  of  the 
stockholders  adopted,  by  a  vote,  a  scheme  of  settlement, 
which  repudiated,  as  a  basis,  the  rule  of  crediting  each  stock- 
holder with  his  payments,  and  legal  interest  thereon,  and 
charging  him  with  the  receipts  and  legal  interest,  but  was 
based  upon  an  arbitrary  compromise  of  the  assumed  rights  of 
the  borrowers  and  non-borrowers,  under  the  charter,  in  its 
ordinary  workings.  A  large  minority  of  the  stockholders 
protested  against  this  scheme,  and  filed  a  bill  in  equity,  seek- 
ing to  enjoin  the  officers  of  the  corporation  from  carrying  out 
said  scheme,  and  praying  that  the  rights  of  the  parties  should 
be  ascertained  and  the  assets  disposed  of  by  the  court  on  prin- 
ciples of  equity,  which,  the  bill  claimed,  simply  required  each 
stockholder  to  be  credited  with  his  payments  and  legal  inter- 
est, and  charged  with  his  receipts  and  legal  interest.  It  was 
held,  that,  even  though  the  rules  of  the  company  under  the 
charter  were  not  obnoxious  to  the  laws  against  usury,  still,  as 
by  common  consent  it  was  agreed  that  the  company  was  now 
to  wind  up,  and  as  the  contracts  of  the  parties  must,  there- 
fore, of  necessity  be  set  aside,  and  the  rules  of  the  charter 

1  Thomson  v.  Ocmulgee  Building  and  Loan  Association,  56  Ga.  350. 


§  502.]     DISSOLUTION   AND    EFFECTS   OF    DISSOLUTION.  507 

disregarded,  it  was  not  competent  for  the  majority  to  adopt  a 
scheme  repudiating  the  rate  of  interest  prescribed  by  law  be- 
tween persons  having  moneyed  dealings  with  each  other,  and 
that,  therefore,  the  injunction  must  be  granted,  which  must, 
however,  not  hinder  the  collection  of  debts  due  by  the  stock- 
holders who  had  forfeited  their  shares  before  the  date  of  the 
agreement.  "  The  cardinal  rule  for  settlement  will  then  be,  to 
charge  each  stockholder  with  his  receipts,  and  interest  on  them 
from  the  time  of  receipt,  and  to  credit  him  with  his  pay- 
ments and  interest  from  the  date  of  the  same,  and  to  divide 
the  assets,  after  allowing  for  expenses,  losses,  etc.  And  it  is  the 
duty  of  the  chancellor  to  take  such  order  as  will  ensure  the 
speedy  payment  of  the  balances  due,  and  the  collection  of  all 
the  assets  according  to  the  rights  of  the  parties  in  each  case.1 
And  stockholders,  who  have  received  more  than  their  proper 
share,  may  be  compelled  to  refund," — and  should  be  made  de- 
fendants in  a  bill  to  wind  up,  etc.4 

§  502.  A  similar,  though  by  no  means  identical,  case  is 
presented,  where  a  building  association  has  become  incompe- 
tent to  perform  its  obligations  to  its  shareholders,  by  reason 
of  insolvency,  and  its  affairs  have  actually  been  placed  in  the 
hands  of  receivers,  with  no  remaining  prospect  that  the 
building  association  will  ever  resume  its  former  operations. 
In  such  a  case,  a  shareholder  who  has  obtained  an  advance  on 
his  shares  of  stock,  on  a  mortgage  which  is  sought  to  be  fore- 
closed, is  not  liable  to  be  charged  for  periodical  dues  and 
fines,  subsequent  to  the  receiver's  appointment,  as  if  the  asso- 
ciation were  continuing  in  business,  and  would  be  able  to 
discharge  its  obligations  towards  him  during  its  probable  du- 
ration.3 "  Part,"  says  the  court,4  "  of  the  consideration  to 
the  shareholder  for  the  discount  or  redemption  of  his  shares 
by  the  association,  at  their  then  fixed  value,  was  the  mode  and 

'The   City  Loan   and   Building  ciation  No.  6,  etc. ,  v.  Zucker,  48  Md. 

Association  of    Augusta  et  al.   v.  448;  The  Peter's  Building  Associa- 

Goodrich  et  al.,  48  Ga.  445.  tion  No.   5  of   Baltimore  City  «. 

»  Goodrich  et  al.  v.  The  City  Loan  Jaecksch,  51  Md.  198. 

and  Building  Association  of  Augus-  4  The  Low  Street   Building  A.S- 

ta  et  al.,  54  Id.  98.  sociation  No.  6  «.  Zucker,  ubi  su- 

3  The  Low  Street  Building  Asso-  pra. 


508  THE  LAW  OP  BUILDING   ASSOCIATIONS.  [CH.  XVIII. 

time  of  payment.  In  such  cases  as  this,  the  contract,  as  be- 
tween the  association  and  the  shareholder  receiving  the  ad- 
vance, assumes  this  form : — The  association  proposes  to  sell  to 
the  shareholder  the  right  of  presently  receiving  the  fixed 
value  of  the  shares,  upon  being  allowed  a  certain  deduction 
from  the  amount,  commonly  called  a  bonus,  it  being,  in  fact, 
a  deduction  made  at  the  time,1  and  the  shares  thus  discounted 
or  redeemed  are  to  be  paid  for  by  the  continuance  of  the  sub- 
scription and  payment  of  periodical  dues,  and  fines,  if  any 
incurred,  until  the  required  amount  shall  be  raised  to  pay 
each  unredeemed  shareholder  the  fixed  value  of  his  shares  in 
full.  .  .  .  Thus  it  is  that  the  [periodical]  payments  constitute 
the  purchase  money  which  the  shareholder  is  required  to  pay 
for  what  he  has  received  in  advance,  or  anticipation  of  the 
time  for  the  redemption  of  all  the  shares ;  and  it  is  for  the 
security  and  ultimate  payment  of  these  [periodical]  dues,  and 
fines,  that  the  mortgage  is  given.  The  supposed  benefit  of 
the  contract  to  the  mortgagor  consists  mainly  of  the  length  of 
time  and  gradual  manner  in  which  payments  are  required  to 
be  made.  He  is  not  in  the  position  of  an  ordinary  borrower 
of  money ;  he  remains  a  member  of  the  association,  subject 
to  its  constitution  and  by-laws ;  and  in  taking  the  advance  on 
his  shares,  he  is  only  allowed  to  anticipate,  for  a  premium  or 
bonus,  the  final  redemption  of  all  the  shares,  when  the  funds 
realized  may  be  sufficient  to  pay  on  each  unredeemed  share 
[the  fixed  value  of  the  same  in  full]  over  and  above  all  losses 
and  liabilities.  Such  being  the  nature  of  the  contract,  and 
the  relation  of  the  mortgagors  to  the  association,  the  facts, 
which  are  undisputed,  that  the  association  is  insolvent,  its  af- 
fairs in  the  hands  of  receivers,  with  no  prospect  of  ever  re- 
suming its  former  operations,  and  with  not  the  slightest 
chance  of  its  ever  being  able  to  pay  to  the  holders  of  the  un- 
redeemed shares  the  fixed  value  .  .  .  per  share,  become  most 
material  in  determining  the  rights  of  the  mortgagors.  From 
these  facts,  it  is  manifest  that  the  event  will  never  occur,  even 
if  the  corporation  is  not  actually  dissolved,  when  the  mort- 

1  This  is  probably  not  accurate     curacy  in  no  wise  affects  the  present 
(see  ante,  §§  389-391),  but  the  inac-     question. 


§  60-*.]     DISSOLUTION   AND   EFFECTS  OF   DISSOLUTION.  509 

gagors,  according  to  the  terms  of  the  covenant,  could  be  re- 
leased from  the  payment  of  the  [periodical]  dues,  or  from  the 
risk  of  incurring  fines  and  forfeitures  for  nonpayment.  The 
circumstances  of  the  association,  therefore,  and  its  inability  to- 
carry  out  in  good  faith  the  contract  with  the  mortgagors,, 
must  terminate  the  contract  as  originally  contemplated,  and 
the  parties  must  occupy  the  same  position  that  they  would 
occupy  if  the  association  were  dissolved." '  For,  "  it  is  not 
a  suspension,  but,  so  far  as  the  borrower  is  concerned,  a  dis- 
solution." ' 

§  503.  It  seems  that  this  doctrine  is  not  recognized  in 
Kansas.  The  articles  of  a  building  association  provided,  thatr 
if  the  interest  be  allowed  to  remain  unpaid  for  more  than  four 
months,  the  directors  shall  compel  payment  of  principal  and 
interest.  A  borrower,  being  a  member  in  the  association,  ex- 
ecuted his  note  to  it,  in  the  shape  of  an  ordinary  promissory 
note  of  $3000,  payable  at  a  certain  date,  with  interest,  and  se- 
cured this  note  by  mortgage  reciting  the  note,  and  drawn  ns 
an  ordinary  mortgage,  and  conveyed  shares  of  stock  to  the 
association.  In  a  suit  by  the  building  association  against  the 
borrowing  member,  the  court  ignored  the  premium,  and  ren- 
dered judgment  in  favor  of  the  association  on  the  basis  of  the 
cash  received  by  the  borrower,  and  decreed  foreclosure  and 
sale  of  all  the  mortgaged  property.  The  defendant,  appeal- 
ing, contended  that  the  building  association,  under  the  con- 
stitution arid  by-laws  of  the  association,  as  they  existed  at  the 
time  of  the  execution  of  the  mortgage,  could  not  recover ; 
that  the  method  of  the  court  in  computing  the  amount  due 
was  wrong,  and  the  recovery  excessive  ;  and  urged,  as  an  ad- 
ditional argument,  that  the  building  association,  by  certain 
amendments  to  its  constitution  and  by-laws,  had  precluded 
itself  from  complying  with  its  obligations  in  the  premises,, 
and  was  therefore  in  no  position  to  complain  of  the  defend- 
ant's default.  These  changes  were  substantially  as  follows : 

1  The  Low  Street  Building  Asso-  Jaecksch,  51  Md.  198;  and  Windsor 

ciation  No.  6,  etc. ,  v.  Zucker,  48  Applegarth  ».  Bandel  (supra)  is  fol- 

Md.  448.  lowed  as  to  the  computation  of  the 

8  The  Peter's  Building  Associa-  amount  properly  due  upon  the  mort- 

tion  No.  5  of  Baltimore  City  t>.  gages. 


610  THE  LAW   OF   BUILDING   ASSOCIATIONS.     [CH.   XVIII. 

The  constitution  originally  provided  that  a  member  whose 
shares  were  unpledged  for  loans  might  give  notice  of  with- 
drawal at  any  time,  and  that  from  and  after  such  notice,  all 
dues  on  such  shares  should  cease.  All  the  holders  of  un- 
pledged shares  having  given  notice  of  withdrawal,  the  sec- 
tion of  the  constitution  requiring  the  payment  of  dues  on 
shares  was  amended  so  as  to  provide  that  no  dues  be  there- 
after required  from  the  unpledged  shares.  Another  amend- 
ment was  also  then  adopted,  changing  the  manner  in  which 
•withdrawn  shares  were  to  be  paid  off,  and  instructing  the  di- 
rectors to  close  the  business  of  the  association.  It  was  held 
that  this  action  in  no  manner  changed  the  contract  evidenced  by 
the  note  and  mortgage,  or  released  any  party  from  any  obliga- 
tion thereon.  "  When  he  (the  borrower)  became  a  member,  he 
knew  that  dues  on  all  unpledged  shares  could  be  stopped  at 
any  time  upon  the  election  of  the  holders  of  those- shares. 
He  joined  the  association  upon  that  condition.  The  holders 
of  those  shares  made  the  election,  and  then  the  only  parties 
owing  dues  were  the  borrowing  members.  The  amendment 
simply  provided  a  change  in  the  manner  of  paying  off  the 
unpledged  shares,  and  that  is  something  which  did  not  inter- 
est the  plaintiffs  in  error  in  the  least.  Their  obligations  were 
not  increased .  by  the  amount  of  a  dime  by  the  amendments. 
So  far  as  the  instruction  to  the  directors  to  close  the  business 
of  the  association  is  concerned,  it  cast  no  new  burden  upon 
any  borrower,  required  of  him  no  other  or  different  pay- 
ments, and  simply  recognized  a  duty  which  the  general  with- 
drawal of  shares  seemed  to  impose.  Plaintiffs  in  error  may 
have  expected  that  all  shareholders  would  remain  such  until 
the  close  of  the  association,  but  the  loan  was  made  upon  no 
such  condition,  and  any  member  had  a  legal  right  to  with- 
draw. The  exercise  of  this  right  by  any  or  all  the  non -bor- 
rowing members  did  not  change  the  contract  of  plaintiffs  in 
error,  or  release  them  from  any  of  its  obligations."  "  It  is 
doubtless  true  that  it  was  contemplated  that  a  borrower  who 
continued  as  such,  and  without  default,  to  the  end  of  the  life 
of  the  association,  should  not  be  compelled  to  pay  the  princi- 
pal of  the  note,  or  perhaps,  more  correctly,  that  the  shares 
which  he  held  would  then  be  of  sufficient  value  to  pay  the 


§  503.]    DISSOLUTION   AND   EFFECTS  OF   DISSOLUTION.  511 


note,  leaving  the  other  property  in  the  mortgage  free ;  but  it 
is  equally  true  that,  pending  the  life  of  the  association,  it  was 
contemplated  that  the  note  and  mortgage  should  express  the 
very  terms  of  the  contract  between  the  parties,  that  the  rela- 
tion between  them  should  be  that  of  borrower  and  lender, 
and  that  the  loan  was  an  asset  of  the  corporation,  which,  like 
any  other  debt,  could  be  collected  when  it  became  due.  Vol- 
untary and  involuntary  payments  of  the  loan  were  expressly 
provided  for." 


1  Hekelnkaemper  et  al.  v.  The 
German  Building  and  Savings  As- 
sociation of  Atchison,  Kas.,  22  Kas. 
549.  It  must  be  observed  that  the 
advance  was,  in  this  case,  treated 
strictly  as  a  loan,  and  the  Ohio, 
Maryland,  and  Georgia  cases,  as  to 
computation  of  the  amount  present- 
ly due  upon  a  building  association 
mortgage  securing  the  payment  of 
dues,  expressly  distinguished  and 
held  inapplicable  on  that  ground. 
In  Massey  v.  The  Citizens',  etc.,  As- 
sociation, 22  Kas.  624,  the  English 
theory  of  partnership  dealings  in  the 
loans  is  adopted,  and  the  taking  of 
premium,  etc.,  justified  because  it 
is  not  a  mere  loan.  The  case  of 
Watkins  v.  The  Workingmen's 


Building  and  Loan  Association,  10 
W.  N.  C.  (Pa.)  414;  38  Leg.  Int. 
333;  97  Pa.  St.  514,  differs  from  He- 
kelnkaemper's  case  (supra),  in  that, 
in  the  former,  there  was  an  actual 
default  of  the  borrower  rendering 
his  mortgage  collectable.  Moreover, 
the  building  association  had  offered 
the  borrowers  the  opportunity  ol 
redeeming  upon  payment  of  100  01 
103  months'  dues,  instead  of  await- 
ing the  regular  determination  of  tha 
business  of  the  society;  thus  extend- 
ing to  them  a  benefit  equal  to  what 
they  lost  in  the  shortened  period 
of  the  investing  members'  contribu- 
tions. There  was  no  attempt  to 
change  the  par  value  of  the 
stock. 


THE   LAW   OP  BUILDING   ASSOCIATIONS.       [CH.  XIX. 

CHAPTER  XIX. 

THE   PLEA   OF   NUL   TIEL   CORPORATION. 

§  504.  Corporate  existence  de  facto  with  prima  facie  title  shown  cannot 
be  questioned  collaterally.  State  alone  can  question  incor- 
poration. 

§  505.  Same  rule  obtains  under  all  methods  of  incorporation. 

§  506.  Irregularities  in  obtaining  charter  which  cannot  be  taken  advan- 
tage of  collaterally. 

§  507.  Unlawful  provisions  in  by-laws. 

§  508.  Illegal  acts  subsequent  to  incorporation. 

§  509.  Lapse  by  charter-limitation.  Denial  of  specific  powers.  Cura 
live  acts. 

g  512.  Exceptions  to  rule  that  corporate  existence  cannot  be  collaterally 
inquired  into. 

§  513.  Admission  of  corporate  existence  estops  from  denying  it  subse- 
quently. Purchaser  from  mortgagor  to  society. 

§  516.  Estoppel  arising  by  behavior. 

Corporate  Existence  de  facto  with  Prima  Facie  Title  Shown  cannot 
be  Questioned  Collaterally.  State  Alone  can  Question  Incorpora- 
tion. 

§  504.  The  plea  of  nul  tiel  corporation,  interposed  as  a 
defence  in  a  suit  in  which  the  building  association  is  plaintiff, 
is  sufficiently  answered  by  the  latter,  by  showing  a  prima 
facie  title  to  corporate  existence,  based  upon  a  de  facto  acqui- 
sition of  the  franchise,  from  the  proper  source,  apparently 
legal.  This  being  produced,  neither  fraud  or  irregularities 
in  the  proceedings  to  obtain  the  incorporation,  nor  any  illegal 
features  of  the  charter  shown,  nor  such  subsequent  acts  of 
the  society  or  its  officers  as  would  work  a  forfeiture  of  its 
franchises,  if  urged  by  the  proper  authority,  and  in  the 
proper  proceeding,  can  be  adduced  for  the  purpose,  nor, 
being  proved  and  apparent,  can  be  made  the  ground,  of 
impeaching  its  corporate  existence  by  way  of  defence,  collat- 
erally, against  its  demands.  Admitting  that  the  proceedings 
had,  with  a  view  to  secure  the  corporate  character,  were  so 
defective  or  tainted  with  fraud,  and  that  the  building  associa- 
tion's conduct  had  been  such,  as  to  make  it  liable  to  the  loss 
of  its  franchises,  it  belongs  to  the  State,  and  to  the  State 
alone,  by  a  proceeding  instituted  for  that  purpose,  to  enforce 


§505.] 


THE   PLEA   OF  NUL  T1EL  COKPOIIATION. 


511* 


the  penalty ;  and  the  building  association,  until,  by  judicial 
sentence,  its  charter  is  declared  void,  is  a  corporation  de 
facto,  and  no  private  person,  more  especially  no  person  deal- 
ing with  it,  can  be  permitted  to  say,  that  it  is  not  also  a 
corporation  dejure.1 

Same  Rule  Obtains  under  All  Methods  of  Incorporation. 

§  505.  Nor  is  there  any  distinction  to  be  drawn,  in  this  re- 
spect, whether  the  incorporation  be  effected  by  act  of  the  Leg- 
islature, directly  granting  the  charter;  by  the  Executive  issu- 
ing letters-patent  by  virtue  of  authority  conferred  upon  him 
by  law ;  by  the  court  exercising  a  discretionary  power  under 
the  statute ;  or  by  the  act  of  the  parties  themselves,  self-con- 
etituting  under  a  general  law,  where  the  charter  or  certificate 
is  merely  the  ministerial  authentication  of  their  act,  ratified 
upon  the  assumption  that  the  actual  organization  has  been 
conducted  according  to  law.  No  difference  is  recognized 
between  the  effect  of  any  particular  one  of  these  modes  of 
incorporation,  and  the  effect  of  the  other.* 


1  Mechanics' Building  Association 
«.  Stevens  et  al. ,  5  Duer,  676 ;  Patti- 
son  v.  The  Albany  Building  and 
Loan  Association,  63  Ga.  373;  The 
Lincoln  Building  and  Savings  Asso- 
ciation v.  Graham,  7  Neb.  173;  Same 
0.  Benjamin  and  Benjamin,  Ib.  181 ; 
McLaughlin  v.  Citizens'  Building 
Association,  62  Ind.  264;  Lord  and 
Robinson  v.  Essex  Building  Associa- 
tion No.  4,  37  Md.  320;  Becket  t>. 
Uniontown  Building  Association, 
88  Pa.  St.  211  ;  Workingmen's 
Building  Association  0.  Coleman.  89 
Id.  428;  Miller's  Est.,  2  Pears.  (Pa.) 
248;  Manuf.  and  Mech.  Sav.  and 
Loan  Co.  v.  Conover,  5  Phila.  (Pa.) 
18:  West  Winsted  Savings  Bank 
and  Building  Association  v.  Ford, 
27  Conn.  282;  Same  v.  Rice,  Ib. 
293;  Hoboken  Building  Association 
'  t>.  Martin,  2  Bens.  (N.  J.)  428;  Reg. 
v.  D'Eyncourt,  9  L.  T.  Rep.,  N.  S. 
72;  28  J.  P.  116  ;  4  Best  and  S. 
(116  Engl.  C.  L.  R.)  820;  12  W.  R. 
40S;  S.  C..  33  L.  J..  M.  C.  89;  10 


Jur.,  N.  S.  513;  3  N.  R.  420.  See 
also,  Triton  Insurance  Co.  ».  Mc- 
Garian,  4  Denio,  392;  Brouwer  v. 
Appleby,  1  Sandf.  S.  C.  Rep.  158; 
Palmer  v.  Lawrence,  3  Id.  161,  170; 
Irvine  v.  Lumbermen's  Bank,  2  W. 
and  Serg.  (Pa.)  190;  Dyer  &  Co.  V. 
Walker,  40  Pa.  St.  157;  Coil  v. 
Pittsburgh  Female  College,  Ib. 
439;  Commonwealth  v.  Morris,  1 
Phila.  411;  Cochran  et  al.  v.  Arnold 
et  al.,  58  Pa.  St.  399;  Importing 
and  Exporting  Co.,  etc.,  T.  Locke, 
50  Ala.  332;  The  Regents,  etc., 
v.  Williams,  9  G.  and  J.  (Md.)  365. 
426;  Jones  v.  Dana,  24  Barb.  (N.  Y.) 
402;  Stedman  v.  Eveleth,  6  Mete. 
(Mass.)  114;  Baker  v.  Adra'r  of 
Backus,  32  111.  Ill;  Glover  v.  Giles, 
L.  R.,  18  Ch.  173. 

s  Cochran  et  al.  v.  Arnold  et  al., 
58  Pa.  St.  399  (overruling  Paterson 
v.  Arnold,  45  Pa.  St.  410).  The 
persons  composing  a  corporation, 
under  such  circumstances,  cannot, 
therefore,  be  sued  in  their  individ- 


514  THE  LAW   OF   BUILDING   ASSOCIATION'S.        [CH.  XIX. 

Irregularities  in  Obtaining  Charter  which  cannot  be  Taken  Advantage 
of  Collaterally. 

§  506.  Among  the  defects  in  the  proceedings  to  obtain 
incorporation,  which  cannot,  upon  collateral  inquiry,  affect  the 
validity  of  a  charter  produced,  or  the  corporate  existence  and 
right  of  recovery  of  the  plaintiff,  are  the  following: — Fraud 
and  bad  faith  in  misstating  the  amount  of  capital  stock  sub- 
scribed, either  to  the  Legislature,1  or  under  a  general  act  ;*  the 
failure  of  the  whole  number  of  corporators  required  by  the 
statute  to  sign  the  application  to  court  for  a  charter,'  or  the 
articles  of  association  to  be  filed  or  recorded  according  to  the 
provisions  of  the  statute  ;4  the  omission  in  the  petition,  or 
certificate,  to  state  the  names  and  number  of  the  first  trustees, 
and  to  file  a  duplicate  of  the  articles  of  incorporation  with  the 
Secretary  of  State,  if  required  ;8  to  fill  out  the  blank  intended 
for  the  insertion  of  the  day  of  the  month  given  as  that  in 
which  the  association  was  effected ;'  and  the  insufficiency,  un- 
der the  law,  of  the  acknowledgment  of  the  articles  of  such 
association.7 

Unlawful  Provisions  in  By-Laws. 

§  507.  Equally  futile  is  an  attempt  to  search  the  associa- 
tion's right  to  be  a  corporation  under  a  charter  shown  by  it, 
because  some  of  the  provisions  incorporated  in  the  charter  do 
not  conform  with  the  requirements  of  the  statute  under  which 

ual  names,  as  partners,  the  plain-  4  Second  Manhattan  Building  As- 

tiff  simply  disregarding  their  claim  sociation    n.   Hayes,   4  Abb.  App. 

to  be  a  corporation.  Dec.    183;  West  Winsted  Savings 

1  Pattison  v.  The  Albany  Building  Bank  and  Building  Association  v. 

and  Loan  Association,  63  Qa.  373.  Ford,  27  Conn.  282;  Same  v.  Rice, 

8  Cochran    v.    Arnold,    etc.,   vJbi  Ib.   293.     See  also    The    People's 
supra.     See    also    Massey   «.    The  Savings  Bank  and  Building  Associ- 
Citizens'  Building  and  Savings  As-  ation  r>.  Collins,  Ib.  145. 
sociation  of  Paola,   22    Kas.    624;  6  Spring  Valley  Water- Works  v. 
Morrison  et  al.,  Rec'rs  Chesapeake  San  Francisco,  22  Cal.  434  (440). 
Mutual  Land  and  Building  Associ-  '  Second  Manhattan  Building  As- 
ation,  ».  Dorsey,  48  Md.  461 ;  Gar-  sociation  v.  Hayes,  ubi  supra.     It 
rett  v.  Dillsbury  and  Mechanicsburg  was  in  this  case  held  to  be  no  ma- 
il. R.  Co.,  78  Pa.  St.  465.  terial  defect. 

3  Workingmen's  Building  Associ-  T  Dannebroge  Mining  Co.  v.  All- 

ation  t.   Coleman,  89  Pa.  St.  428.  ment  and  Barrett,  26  Cal.  286.    See 

See  also  Rlioads  «.  Hoernerstown  also  Spinning  «  The  Home  Build'g 

Building  Association,  82  Id.  180.  and  Savings  Ass'n,  26  Ohio  St.  483. 


§  508.]  THE   PLEA.   OF   NUL  TIEL  CORPORATION.  515 

it  was  granted.1  Such  an  attempt  would  be  entirely  irrele- 
vant and  improper.  The  question  of  a  building  association's 
corporate  existence  is  by  no  means  necessarily  involved  in  the 
inquiry.  Many  of  the  provisions  in  the  articles  may  be  found 
to  be  without  the  warrant  of  law,  and  still  the  corporation  exist 
and  be  capable  of  exercising  the  rights  and  franchises  con- 
ferred upon  it  by  law.  Collaterally  such  a  question  cannot 
arise.*  If  the  proceeding  were  instituted  to  enforce  and  give 
effect  to  a  specific  provision,  incorporated  into  the  articles  of 
association,  in  conflict  with,  or  not  justified  by  law,  another 
and  different  question  would  be  presented;  for  no  such  pro- 
vision can  be  enforced.8  But  the  mere  existence  of  it  cannot 
be  made  the  ground  of  attacking  the  corporate  being  of  the 
society,  except  by  direct  proceedings  taken  at  the  instance 
and  in  the  name  of  the  State. 

Illegal  Acts  Subsequent  to  Incorporation. 

§  508.  Nor,  again,  do  subsequent  illegal  acts  or  omissions 
of  the  association,  such  as  would,  at  the  instance  of  the  attor- 
ney-general, upon  quo  warranto,  become  fatal  to  its  continu- 
ance as  a  corporation,  give  any  person  defending  against  a 
claim  of  the  association  the  right  to  turn  the  tables  upon  it, 
and  put  it  upon  trial  for  its  life,  assuming  to  set  off,  as  it  were, 
against  the  breach  of  his  obligations  to  the  society,  the  viola- 
tion of  the  latter's  duty  to  the  State,  and  requiring  the  court 
to  interrupt  the  process  of  determining  his  own  liability  to 
the  association,  which  is  the  direct  purpose  of  the  suit,  and  to 
go,  collaterally,. into  an  investigation  of  its  rights,  by  reason  of 
any  act  or  omission,  on  its  part,  to  retain  franchises  guaranteed 
to  it  by  its  charter.  Even  if  the  association,  in  consequence 
of  improper  behavior,  has  lost  its  right  to  insist  upon  these 
privileges  as  against  the  State,  it  is  still,  until  sentence  of  dis- 
solution has  been  pronounced  upon  it,  in  a  proceeding  insti- 
tuted directly  for  the  purpose,  a  corporation  de  facto.  "  If 
there  is  anything  settled,  it  is  that  the  corporate  existence  of 
a  corporation  de  facto  cannot  be  inquired  into  collaterally. 

1  Lord  and  Robinson  V.  The  Es-  211.     See   also    Rhoads  «.  Hoern- 

sex  Building  Association  No.  4,  37  erstown   Building  Association,   83 

Md.    320;    Becket    v.    Uniontown  Id.  180.                              •  Ib. 

Building     Association,    88  Pa.  St.  »  See  «nte.  §  309. 


516  THE   LAW   OF   BUILDING   ASSOCIATIONS.       [ell.   XIX. 

Upon  this  subject,  the  authorities  are  too  numerous  to  admit 
of  citation." ' 

Lapse  by  Charter  Limitation.    Denial  of  Specific  Powers.     Curative 
Acts. 

§  509.  A  qualification  must,  however,  be  added  to  this.  It 
has  been  said a  that  the  doctrine,  that  the  corporate  existence 
of  a  plaintiff  denominating  himself  a  corporation  cannot  be 
impeached  in  the  suit,  "  does  not  go  to  the  extent  of  preclud- 
ing a  private  person  from  denying  the  existence  dejure  and 
de facto  of  an  alleged  corporation.  It  cannot  be  true  that 
the  mere  allegation  that  a  party  is  a  corporation  puts  the 
question,  whether  it  is  such  a  corporation,  beyond  the  reach 
of  inquiry  in  a  suit  with  a  private  person.  It  must  be  a  cor- 
poration either  dejure  or  defacto,  or  it  has  no  legal  capacity 
to  sue  or  be  sued,  nor  any  capacity  of  any  kind.  It  is  an  in- 
dispensable allegation,  in  an  action  brought  by  a  corporation, 
that  the  plaintiff  is  a  corporation,  and  it  results  from  the  logic 
of  pleading  that  the  opposite  party  may  deny  the  allegation. 
Were  this  not  so,  any  number  of  different  bodies  of  men,  each 
body  styling  itself  the  directors  of  a  given  .  .  .  company, 
might  bring  separate  actions,"  without  any  possibility  of 
showing,  on  the  part  of  the  defence,  that  they  are  not  such, 
and  that  their  claim  to  appear  such  is  fraudulent  and  untrue. 
This  every  defendant,  unless  he  has  estopped  himself  by  his 
previous  actions  or  admissions,3  is  at  liberty  to  do,  under  a 
plea  of  nul  tiel  corporation,  until  an  actual  charter  apparently 
legal  is  shown.  Even  then  there  is  nothing  to  prevent  his 
demonstrating,  from  the  face  of  the  charter,  that  the  period 
for  which  the  society  was  incorporated  has  run  out,  and  that, 
upon  its  own  showing,  it  is  working  under  a  grant  of  fran- 
chises, which  by  its  very  terms  has  become  inoperative  by 
lapse  of  time. 

§  510.  Nor  is  there  any  rule  of  law  which  would  preclude 
him  from  contending,  upon  the  basis  of  the  charter  produced, 

1  Cochran  et  al.  v.  Arnold  et  al.,         *  Oroville  and  Virginia  R.  R.  Co. 
58  Pa.  St.  399,  405,  and  see  ante,     v.  Plumas  County,  37  Cal.  354, 
cases  in  notes   to  §§  504-505.    As        »  See  post,  §§  513-516. 
to  unlawful  acts  of  building  associ- 
ation, see  ante,  §§  285-324. 


§  510.]  THE    PLEA    OF    NUL   TIEL   CORPORATION-.  517 

together  with  the  record  of  its  origin  accompanying  it,  that 
the  corporation  impleading  him,  whilst  being  a  corporation,  is 
not  a  building  association  under  the  laws  of  the  State,  and 
not,  therefore,  entitled  to  exercise  the  privileges  and  demand 
the  exactions  conceded  to  such  corporations  exclusively.  The 
manner  of  obtaining  the  charter,  the  provisions  it  embraces, 
and  the  rules  of  business  adopted  by  the  society,  may  be  such 
as  to  indicate,  that  whilst  it  is  a  corporation  de  facto,  and,  for 
all  the  person  defending  can  be  permitted  to  say,  de  jure,  it 
becomes  perfectly  apparent  that  it  is  not  a  corporation  incor- 
porated under  the  particular  act  whose  benefit  it  claims. 
Such  a  defence  does  not  draw  in  question  the  corporate  exist- 
ence of  the  building  association.  It  merely  denies  its  right 
to  exercise  privileges  conferred  by  an  act  under  whose  protec- 
tion it  has  never  placed  itself,  and  to  share  in  whose  benefits 
it  can  show  no  credentials.  Such  an  association  may  in  law, 
and  for  the  purposes  of  the  defence,  be  a  corporation  ;  but  it 
cannot  claim  the  powers  conferred  by  the  statute  upon  those 
institutions  which  are  specifically  its  creatures,  unless  it  has 
brought  itself  under  that  statute,  by  virtue  of  amendments  or 
corrections  authorized  by  law.  Nor,  it  seems,  will  curative 
acts,  intended  to  reach  building  associations  generally,  help 
such  corporations,  because,  whatever  they  may  be,  they  are 
not  building  associations.  Thus,  where  the  charter  of  a  build- 
ing association  was  obtained  upon  a  petition  of  a  less  number 
of  citizens  of  Pennsylvania  than  the  Act  of  1859  required,  and, 
besides,  many  of  its  provisions  were  inconsistent  with  those  of 
that  statute,  this  was  held  to  be  evidence  that  it  was  not  the 
intention  of  the  persons  applying  for,  or  of  the  court  grant- 
ing the  incorporation,  to  proceed  under  the  Act  of  1859,  and 
the  rights  of  building  associations  under  that  act  were  held 
inapplicable  to  it.1  But  if  the  intention  to  incorporate  under 
the  proper  act  is  clear  from  a  correspondence  of  the  charter 
provisions  with  the  leading  features  of  the  act,  or  from  the 
agreement  in  the  number  of  the  corporators  signing  the  char- 
ter with  those  required  by  statute,  and  there  is  a  general  con- 
formity in  the  actual  management  of  the  society  with  the 

1  Rhoads  v.  Hoernerstown  Build-     etc.,  Society,  45  Md.  546.    But  see 
ing  Association,  82  Pa.  St.  180.    See     §  514. 
also  Williar  v.  The  Butcher's  Loan, 


518  TilK    LAW    OF   BUILDING    ASSOCIATIONS.       [    II.    MX. 

statute,  then  neither  the  defect  of  corporators,'  nor  the  in- 
consistency of  some  of  the  charter  provisions,*  will,  standing 
alone,  debar  the  association  from  taking  advantage  of  a  cura- 
tive enactment  passed  for  the  benefit  of  building  associations 
generally,  or  exercising  the  rights  by  law  conceded  to  such.1 
§  511.  As  to  the  constitutionality  of  such  curative  acts,  in 
their  effects  upon  contracts  made  before  they  are  taken  ad- 
vantage of,  a  case  arose  in  Ohio,  where,  under  the  Act  21 
Feb.,  1867  (64  Ohio  L.  18),  the  certificate  of  incorporation 
was,  by  mistake,  acknowledged  before  a  Notary  Public,  in- 
stead of  a  Justice  of  the  Peace,  as  then  required.  In  pro- 
ceedings under  the  Act  10  Mar.,  1859  (2  S.  and  C.  117-'), 
being  an  act  to  authorize  courts  to  give  effect  to  the  intention 
of  parties  and  officers  by  curing  defects,  omissions,  and  errors 
in  instruments  and  proceedings,  the  mistake  was  subsequently 
corrected.  It  was  held,  that,  as  the  Act  of  1867  contemplated 
the  assistance  of  that  of  1859,  the  two  must  be  taken  together; 
that,  therefore,  there  was  no  invasion  of  any  vested  rights  in 
giving  it  its  full  effect,  which  was,  that  the  correction  made 
thereunder  rendered  the  building  association  a  corporation  de 
hire  from  the  date  of  its  organization,  not  only  as  against 
persons  dealing  directly  with  the  building  association,  but  as 
against  all  others.4  And  in  Pennsylvania,  an  act  passed  11 

1  Workingmen's  Building    Asso-  must  be  supposed  that  the  Act  of 

chit  i<m  r.  Coleman,  89  Pa.  St.  428.  1874  was  held  inapplicable  to  the 

•  Becket  v.  Uniontown   Building  case,  because  the  charter  of  the  build- 
Association,  88  Pa.  St.  211.  ing  associr.tion  showed  upon  its  face 

*  In    Pennsylvania    an  act  was  no  intention  to  be  incorporated  un 
passed,   May  11,   1874,    validating  der  the  Act  of  1859;  and  as  there 
charters  of    building    associations,  was,  at  the  time  of  its  organization, 
"  defective  in  validity."    The  cases  no  other  building   association  act 
of  Rhoads  v.  Building  Association,  in  force  in  Pennsylvania,   it  was, 
Building    Association   v.    Coleman,  therefore,  not  a  building  association 
and  Becket  v.  Building  Association,  at  all,  and  consequently  not  aided 
above  cited,  were  all  decided  subse-  by  the  Act  of  1874.     Its  status  was 
quently  to  that  act,  and  must,  there-  that  of  an  unincorporated  society, 
fore,  be  read  together.     The  fact  Possibly,  too,  the  act  was  held  inap- 
that,  in  the  first,  the  Act  of  1874  plicable  on  account  of  rights  of  par- 
was  not  brought  to  the  notice  of  the  ties  attaching  before  its  passage, 
court,  can  scarcely  throw  the  case  4  Spinning  v.  The  Home  Build- 
out,  especially  as  it  was  not  subse-  ing   and    Savings  Association,   26 
quently   expressly    overruled,   but  Ohio  St.  483. 

referred  to  and  distinguished.     It 


§  513.]  THE    PLEA    OF   NUL   TIEL   CORPORATION.  519 

May,  1874,  was  held  to  lend  its  aid  to  building  associations 
for  the  enforcement  of  contracts  made  before  its  passage. 
But  it  is  proper  to  say  that  the  question  of  constitutionality 
was  not  raised.1 

Exceptions  to  Rule  that  Corporate  Existence  cannot  be  Collaterally 

Inquired  Into. 

§  512.  In  certain  cases,  moreover,  it  is  said  by  Mr.  Field 
in  his  "  Treatise  on  the  Law  of  Private  Corporations,"9  it  has 
been  held  that  the  corporate  existence  may  be  inquired  into,  in 
a  collateral  proceeding.  "  Thus,  in  a  proceeding  in  chancery 
against  a  corporation,  to  set  aside  a  conveyance  of  real  estate, 
alleged  to  have  been  obtained  by  the  fraud  and  misrepresenta- 
tion of  the  company,  in  relation  to  its  existence  as  a  corpora- 
tion, it  has  been  held  that  the  fact,  whether  or  not  the  com- 
pany ever  had  a  corporate  existence,  so  as  to  enable  it  to  take 
and  hold  property,  may  be  inquired  into ;  and  that  if  a  com- 
pany, professing  a  corporate  existence  which  it  does  not 
possess,  fraudulently  acquires,  for  a  particular  purpose,  the 
property  of  another,  and  conveys  the  same,  the  sufficiency  of 
such  conveyance  or  transfer  may  be  inquired  into  collaterally. 
And  if  a  corporation,  by  its  own  acts,  has  ceased  to  exist,  or 
lias  suffered  or  permitted  acts  which  destroy  its  existence,  it 
is  as  fully  and  entirely  dissolved,  as  if  declared  so  to  be  by  the 
judgment  of  a  competent  court ;  that  where  a  corporation  has 
ceased  to  have  an  existence,  as  a  legal  and  necessary  con- 
sequence of  certain  acts,  and  a  party  claims  that  he  has  been 
injured  thereby,  or  that  certain  benefits  result  to  him  there- 
from, he  may  have  his  remedy  without  first  instituting  direct 
legal  proceedings  to  have  the  corporation  declared  dissolved 
by  the  court." 

Admission  of  Corporate   Existence  Estops  from  Denying  it  Subse- 
quently.   Purchaser  from  Mortgagor  to  Society. 
§  513.  One  who  has  dealt  with  a  building   association. 

more  especially  a  borrower  from  it,  who  has  expressly  recog- 

1   See    Workingmen's    Building  Canal  Co.  v.  Railroad  Co.,  4  G.  and 

and  Loan  Association  v.  Coleman,  J.  1;  Sleep.  Bloom,  19  Johns.  456; 

89  Pa.  St.  428.  2  Kyd  on  Corp.  467;  King  v.  Pass- 

*  §  494,  cit.  Carey  v.  The  Cincin-  more,  ST.  R.  244;  1  Rolle's  Abr. 

nnti.    etc.,    R.   R.    Co.,  5  la.    357;  514;  4  Com.   Dig.   273.     And   see 

Philipps  v.  Wickham,  1  Paige,  595;  Miller's  Est.,  2  Pears.  (Pa.)  248. 
v.   Penniman,  8  Cow.  r,s?: 


520  THE   LAW   OF   BUILDING    ASSOCIATIONS.          [CU.   MX. 

nized  its  corporate  existence,  in  the  instrument  upon  which 
he  issued,  is  estopped  from  setting  up  the  plea  of  nnl  tlel 
<><>i-j'<>)'<tt!»n  as  ;i  ill-fence.  A  note  to  a  corporation  in  its  cor- 
porate name,  is  such  a  distinct  and  express  admission  of  its 
lawful  being,  that  the  maker  cannot  afterwards  be  permitted 
to  deny  that  it  is  a  duly  organized  corporation.1  And  a  mort- 
gage given  to  a  building  association,  iii  the  same  terms,  also  is 
a  recognition  of  its  right  to  sue  in  accordance  with  the  act 
under  which  it  assumes  corporate  powers.2  Where,  there- 
fore, a  member  of  a  building  association  had  taken  a  loan 
from  it,  giving  his  note  for  the  amount,  and  also  executing  a 
mortgage  to  it,  in  which  he  described  the  mortgagee  as  a  body 
politic  and  corporate,  he  was  held  to  be  estopped  thereafter, 
in  a  suit  upon  his  obligation,  from  denying  the  corporate  ex- 
istence of  the  building  association,  with  the  special  powers 
conferred  by  the  statute  under  which  it  claimed  incorporation, 
although  it  was  uncertain  whether  or  not  the  charter  had  been 
obtained  upon  the  precise  proceedings  required  by  the  act.* 
So,  too,  where  an  association  of  persons,  in  good  faith,  at- 
tempted to  organize  as  a  corporation,  under  the  laws  regulat- 
ing building  associations,  and  afterwards  commenced  and 
carried  on  business  as  a  building  association,  it  was  held  that 
its  members  and  others  who  have  contracted  with  it  as  such 
corporation,  are  estopped,  in  a  suit  on  such  contract,  from 
setting  up  the  defence  of  no  such  corporation,  on  account  of 
a  defect  in  its  certificate  of  incorporation.4 

1  The  Congregational   Society  in  282;    Stow  v.   Wise,  7  Conn.  214; 

Troy  v.  Perry,  6  N.  H.  164;  Dutch-  Danbury  and  Norwalk  R.  R.  Co.  v. 

er's  Cotton  Manufactory  v.  Davis,  Wilson,    22   Conn.    435;     Bank  of 

14  Johns.  (N.  Y.)238.  Gallopolis  v.  Trimble.  6  B.  Monr. 

4  Franz  v.  The  Teutonia  Build-  599;  South  Bay  Meadow  Dam  Co. 

ing  Association,  No.  2,  24  Md.  259.  «.  Gray,  30  Maine,  547;  Coelinm  r. 

This  was  an  ex  parte  foreclosure,  Arnold,  58  Pa.  St.  (overruling  Pat- 

and  the  mortgage  had  no  averment  terson  v.  Arnold,  45  Id.  410);  An- 

even  that  the  association  had  com-  gell  and  Ames,  Corp.,  §  94. 
plied  with  the  Act  of  1852.  4  Hagerman  et  al.  t>.  The  Ohio 

J  West  Winsted    Savings   Bank  Building  and  Savings  Association, 

and  Building  Association  v.  Ford,  25  Ohio  St.  186;  Lucas  v.  Green- 

27  Conn.  282;   Same  v.  Rice,  Ib.  ville  Building  and  Savings  Associa- 

293;    see  also    Worcester  Medical  tion,  22  Ohio  St.  339;  Spinning  e. 

Institution  «.   Harding,   11    Cush.  The  Home  Building  and  Savings 

(Mass.)  285;  Narragansett  Bank  v.  Association  of  Dayton  et  al.,   26 

Atlantic  Silk  Co.,  3  Mete.  (Mass.)  Ohio  St.  433. 


§  516.]  THE   PLEA   OF   NUL  TIEL  CORPORATION.  521 

§  514.  In  Connecticut,  the  doctrine  of  estoppel  as  to  the 
impeachment  of  a  building  association's  corporate  existence, 
seems  to  have  been  carried  yet  farther.  A  building  associa- 
tion, organized  as  a  corporation  and  claiming  to  be  such,  made 
a  loan  to  a  member,  who  gave  a  mortgage,  describing  the 
mortgagee  as  a  corporation  and  by  its  corporate  name.  lie; 
afterwards  conveyed  his  equity  of  redemption  in  the  mort- 
gaged premises  to  another,  the  conveyance  being  made  ex- 
pressly subject  to  the  above  mortgage,  and  the  purchaser  as- 
suming the.  mortgage  debt.  He  considered  the  loan  usurious 
in  its  origin,  and  subject,  under  the  statute,  to  a  large  reduc- 
tion, and,  in  view  of  that  fact,  paid  a  larger  sum  for  the  equity 
of  redemption.  There  was  some  question  as  to  the  regularity 
of  the  incorporation,  and,  in  consequence,  as  to  its  power  to 
enforce  the  loan  in  spite  of  the  statutes  of  usury.  It  appears 
to  have  been  held,  however,  fliat  as  the  member,  if  he  had 
been  respondent,  would  have  been  estopped  from  denying  the 
plaintiffs  corporate  existence,  the  purchaser  under  him,  and 
subject  to  his  mortgage,  was  likewise  precluded  from  raising 
that  defence ;  and  that  the  estoppel  extended,  not  merely  to 
a  general  denial  of  the  existence  of  the  corporation,  but  to  a 
denial  of  its  possession  of  the  special  powers  conferred  upon 
it  by  the  statute,  and  which  had  been  exercised  in  making  the 
contract.1 

§  515.  Similarly,  an  estoppel  by  express  admission  is 
created  when  the  defendant  in  his  affidavit  of  defence  admits 
that  the  building  association  plaintiff  is  a  corporation  incor- 
porated under  the  act  under  which  it  assumes  to  operate  and 
sue,  and  the  benefits  accruing  to  associations  established  under 
which,  it  claims  as  against  the  defendant.  None  of  them  is 
he  at  liberty  subsequently  to  dispute  as  inapplicable  to  it* 

Estoppel  by  Behavior. 

§  516.  An  estoppel  may  also  arise  from  the  conduct  of  the 
party  setting  up  the  defence.  A  borrowing  member,  who 
has,  in  every  mode  and  manner,  recognized  and  admitted  the 

'  The  People's  Savings  Bank  and  Association,  unrcported  decision  of 

Building  Association  v.  Collins,  27  Supr.  Ct,  of  Pa.,  East.  Distr.,  ou 

Conn.  145.  Error  to  C.  P  of  Berks  County, 

9  Ganster  ».  Homestead  Building  1881. 


522  THE   LAW   OP  BUILDING  ASSOCIATIONS.        [CH.  XX. 

validity  of  the  by-laws  under  which  an  association  acted,  and 
upon  the  faith  of  whose  admissions  others  were  induced  to 
act,  cannot  be  permitted,  when  sued  by  the  society,  to  ques- 
tion the  corporate  existence  of  the  society,  or  impeach  the 
mode  by  which  the  by-laws  invoked  against  him  were 
adopted, — he  having  signed  them,  shared  in  the  profits,  and 
for  several  years  paid  his  dues  regularly.1  Nor  would  one 
who,  as  a  member,  obtained  a  loan  from  the  society,  in  his 
bond  and  mortgage  stipulating  for  faithful  performance  of 
his  duties  as  such,  be  permitted  to  dispute  the  society's  right 
to  recover  from  him,  on  the  ground  that,  he  not  having  signed 
the  by-laws  as  was  required  of  members,  the  loan  was  to  a 
stranger,  and  hence  unlawful.* 


CHAPTER  XX. 

UNINCORPORATED   BUILDING   ASSOCIATIONS. 

§  517  General  nature  and  legal  status  of  unincorporated  building 
associations. 

§  518.  Unincorporated  associations  cannot  claim  benefit  of  statutes 
designed  to  protect  societies  incorporated  under  them.  By-laws. 

§  519.  Management  and  contracts  of  unincorporated  building  associa- 
tions. Agents. 

§  520.  Effect  of  incorporation  upon  rights  acquired  whilst  unincor- 
porated. 

§521  Incorporation  of  association  by  its  existing  constitution  and 
by  laws. 

General   Nature  and  Legal  Status  of  Unincorporated  Building  Asso- 
ciations. 

§  517  It  remains  to  consider  briefly  the  status  of  unin- 
corporated building  associations  before  the  law, — a  branch 
of  learning  becoming  more  and  more  unimportant,  the  more 
generally  the  legislatures  of  the  different  States  have  taken 
and  may  take  it  into  their  hands  to  regulate  building  associa- 
tion affairs  by  statute,  and  the  more  universally  the  acquisi- 

1  Morrison  et  al.,  Rec'rs  Chesa-  f  Howard  Mutual  Loan  and  Fund 
peake  Mutual  Land  and  Building  Association  «.  Mclntire,  8  Allen 
Association,  t.  Dorsey,  48  Md.  461.  (Mass.),  571;  and  see  ante,  §  818. 


§  517.]      UNINCORPORATED   BUILDING   ASSOCIATIONS.  523 

tion  of  corporate  existence,  for  the  accomplishment  of  the 
purposes  of  the  building  association  scheme,  becomes  facil- 
itated, and  the  rights  and  incidents  and  liabilities  pertaining 
thereto  defined  and  circumscribed,  by  statutory  enactment. 
In  the  relations  of  the  members  to  each  other  and  to  the 
society,  there  is,  in  the  incorporated  societies,  an  unmistak- 
able partnership  element.1  They  are  said  to  be  merely 
incorporated  partnerships.*  Unincorporated  building  associa- 
tions are,  therefore,  partnerships  only.  But  whilst  the  former 
are  constituted  by  and  under  the  sanction  of  the  State,  ex- 
pressly approving  and  legitimating  every  detail  of  the  pecu- 
liar partnership  dealings  proposed  to  be  carried  on,  the  latter 
lack  the  countenance  of  such  supreme  authority,  and  their 
acts  are  to  be  judged,  not  by  the  exceptional  standard  pro 
vided  for  the  former,  but  by  the  general  law  governing  the 
transactions  between  private  individuals.  In  applying  this 
law,  the  courts  will  allow  themselves  to  be  guided  by  the 
rules  which  were  adopted  by  the  members  in  forming  the 
association,  or  whose  binding  efficacy  they,  in  joining  it, 
have  either  formally  recognized  and  subscribed  to,  or  pre- 
cluded themselves  from  denying,  by  their  participation  in  the 
society's  business  and  profits  under  those  rules.  These  are  anal- 
ogous to  articles  of  copartnership  entered  into  between  the 
different  members ;  and  the  reciprocal  rights  and  duties  aris- 
ing under  them,  so  far  as  they  are  countenanced  by  law,  are 
protected  and  enforced  by  the  courts,  as  in  the  case  of  volun- 
tary benevolent  associations,  to  which  they  bear  close  resem- 
blance. But  the  legality  of  any  given  provision  of  the 
articles  becomes  a  matter  not  of  construction  of  special 
statutes,  as  in  building  associations  incorporated  under  such, 
but  of  application  of  general  rules  and  principles  of  law,  or 
general  legislative  enactment  having  no  particular  reference 
to  the  system  they  affect.  Regard  must  also  be  had  to  the 
general  policy  of  the  law  as  bearing  upon  any  question  pre- 
sented,— a  consideration  from  which,  in  most  instances  where 
incorporated  building  associations  are  concerned,  the  courts 
are  relieved  by  the  express  will  of  the  legislature  overriding 
such  policy,  or  authoritatively  settling,  as  to  the  incorporated 

1  See  ante,  Ch.  xii.  Loan  and  Building  Association,  9 

*  See    In    re    National    Savings,      W.  V .  f1  .(IV  79. 


524  THK   LAW   OF   BUILDING    ASSOCIATIONS.         [CH.   X ... 

building  associations,  points  otherwise  doubtful  or  differently 
decided. 

Unincorporated  Associations  cannot   Claim  Benefit   of  Statutes  De 
signed  to  Protect  Societies  Inco'  porated  under  Them.   By-Laws. 

§  518.  None  of  the  immunities  conferred  by  the  statute 
upon  societies  incorporated  under  it,  whereby  an  exception  is 
created  in  their  favor  from  the  general  law,  can  be  claimed 
or  exercised  by  such  as  are  unincorporated.1  Nor  is  a  con- 
tract made  prior  to  incorporation  aided  by  the  subsequent 
incorporation  of  the  society  making  it."  An  unincorporated 
building  association  may,  by  its  trustees,  take  bond  and  mort- 
gage for  loans  made  by  it,s  and  such  obligations  may  be  for 
the  payment  of  subscriptions  during  the  continuance  of  the 
enterprise,4  but,  the  better  opinion  seerns  to  be  that  it  can 
recover  neither  tines 6  nor  premiums.'  There  is  no  difference, 
however,  between  incorporated  and  unincorporated  building 
associations  in  the  fact  that  payments  upon  the  stock  are  rot 
payments  to  the  mortgage.7  The  scheme  itself,  in  both 
classes  of  associations,  and  the  elements  and  design  of  the 
borrowing  member's  contract  in  the  one  and  in  the  other,  are 
the  same ;  the  legality  of  the  details  of  that  contract,  of  the 
methods  by  which  it  is  proposed  to  work  out  the  contem- 
plated result,  is  a  very  different  matter.  It  is  needless  to  go 
into  any  further  examination  of  the  business  and  powers  of 

1  Melville  v.  The  American  Bene-  (Merrill  ».  Mclntire,  13  Gray,  157; 

fit  Building  Association  et  al.,  33  Baxters.  Mclntire,  Ib.  168;  Barker 

Barb.  (X.  Y.)  103;  Jarret  ».  Cope,  v.  Bigelow,  15  Id.  130;  Delano  v. 

68  Pa.  St.  67;  Link  v.  Germantown  Wild,  6  Allen,  1;  Shannon  r.  Dunn, 

Building  Association,  89  Id.  15.  43  N.  H.  196)  are  authorities  to  the 

*  Melville  v.  The  American  Bene-  contrary,  proceeding  upon  the  Eng- 

fit  Building  Association  et  al.,  ubi  lish  theory  of  partnership  dealings 

supra.  in  the  society,  and  carrying  it  to  its 

3  Merrill  v.    Mclntire,    13   Gray  logical  extremes.     This  theory  has 
(Mass.),   157;    Baxter  v.   Mclntire,  been  sufficiently  examined  hereto- 
Ib.  168.  fore,  and  the  cases  decided  under  it 

4  Ib.  extensively  reviewed  (see  §§  341, 

5  See  cases  in  note  1 ;  and  ante,  344,   355,   356).      It    is,    therefore, 
§  405;    but  see  Massachusetts  and  unnecessary  to  go  into  the  question 
New  Hampshire  cases  in  next  note.  here. 

6  See  cases  in  note  1 ;  and  ante,         7  Link  r.  Germantown   Building 
??  :r>;},   388  *eqq.     The  Massachu-  Association,  89  Pa.  St    15;  Barker 
setts    and    New    Hampshire    cases  v.  Bigelow,  15  Gray  (Mass.),  130. 


§  519.]       UNINCORPORATED    BUILDING    ASSOCIATIONS.  525 

unincorporated  building  associations.  The  theory  underlying 
all  these  institutions,  whether  incorporated  or  otherwise,  is 
well  understood,  and  the  methods  by  which  its  results  are  to 
be  accomplished  have  been  sufficiently  discussed.  They  are 
available  for  the  purposes  of  unincorporated  societies  just 
so  far  as  their  pursuit  requires  neither  express  legislative 
sanction,  nor  corporate  capacity.  No  functions  presupposing 
the  latter  can,  of  course,  be  exercised  by  mere  voluntary 
societies ;  but  these,  on  the  other  hand,  are  untrammelled  by 
the  restraints  imposed  by  statute  upon  incorporated  associa- 
tions, and  free  to  mould  their  own  course,  within  the  limits 
of  the  general  law,  of  justice,  and  of  equity,  by  their  articles 
of  association,  or  constitution,  and  by-laws  passed  in  con- 
formity therewith.  By-laws  inconsistent  with  the  constitu- 
tion of  an  unincorporated  building  association  are  void.1 

Management  and  Contracts  of  Unincorporated  Building  Associations. 
Agents. 

§  519.  The  machinery  of  government  in  unincorporated 
building  associations  is  entirely  similar  to  that  of  the  incor- 
porated societies.  The  title  to  its  property  is  taken  by  and 
held  in  the  name  of  trustees.3  These  and  the  remaining  offi- 
cers are  the  regular  agents  of  the  society,  appointed  or  elected 
in  the  manner  prescribed  by  its  rules.  Through  these  officers, 
trustees,  and  agents  specially  appointed,  the  society  acts  in 
all  its  contract  dealings,  and  is  bound  by  them  upon  the 
principles  of  agency.'  Thus  an  assignment  from  the  trustees 
of  such  an  association  of  a  mortgage  held  by  them,  passes  the 
legal  title,  in  the  absence  of  evidence  that  their  power  of 
alienation  is  restrained  by  the  by-laws  of  the  association.4 
But,  where  a  member  of  a  voluntary  building  association, 
who  was  also  its  secretary,  made  a  bond  and  mortgage  to  the 
society  for  a  loan,  part  of  which  he  received,  but  repaid,  on 
being  told  that  the  sum  borrowed  was  too  great  for  the  real 
estate  security  offered,  and,  executing  a  new  bond  for  the 
lesser  amount  agreed  upon,  cancelled  the  first ;  it  was  held, 

1  Powell  v.  Abbott,  9  W.  N.  C.  tions  to  the  society,  ante,  §§  231- 

(Pa.)  231.  253. 

*  See  ante,  §  214  *  Manahan  v.  Varnum,  11  Gray 

3  See,   as  to   the  appointment  of  (Mass.),  405. 
agents  and  officers,  and  their  rela- 


526  THE   LAW   OF   BUILDING   ASSOCIATIONS.         [cii.   XX. 

that  if  the  association  did  not  assent  to,  or  ratify  the  cancel lu- 
tion,  they  might  still  maintain  a  writ  of  entry  to  foreclose  the 
mortgage.1 

Effect  of  Incorporation  upon  Rights  Acquired  whilst  Unincorporated. 

§  520.  The  incorporation  of  an  unincorporated  building 
association  under  a  general  statute  does  not  affect  the  right  of 
its  trustees  to  maintain  an  action  on  a  bond  previously  given 
to  it.*  "  In  availing  themselves  of  the  provisions  of  the  stat- 
ute, the  associates  lost  none  of  the  rights  which  they  had 
previously  acquired.  The  choses  in  action  which  belonged 
and  the  debts  which  were  due  to  them,  were,  in  legal  effect, 
and  by  operation  of  law,  transferred  and  assigned  to  the  cor- 
poration." '  So,  too,  in  Indiana,  a  building  association  which 
was  organized  and  did  business  as  an  unincorporated  society, 
and  received  a  mortgage  from  one  of  its  members,  was  sub- 
sequently allowed  to  sue  upon  it  in  its  corporate  capacity, 
and  was  not  compelled  to  sue  in  the  names  of  the  individuals 
who  composed  the  voluntary  association  before  its  incorpora- 
tion.4 But  the  validity  of  the  contract  itself  is  not  affected, 
one  way  or  the  other,  by  an  incorporation  of  the  society  sub- 
sequent to  the  date  of  its  execution.5 

Incorporation  of  Association  by  its  Existing  Constitution  and  By-Laws. 

§  521.  Where  a  building  association  has  been  in  opera- 
tion, without  the  corporate  franchise,  under  certain  rules 
established  as  its  constitution  and  by-laws,  an  act  of  Legis- 
lature incorporating  it  by  its  existing  constitution  and  by- 
laws, without  their  being  embodied  in  the  act,  is  in  Georgia 
said  to  be  constitutional  and  valid." 

1  Baxter  v.  Mclntire,   13  Gray,  fund  association  into  a  corporation 

168.     And  upon  the  trial  of  the  writ  under  the  St.  1854,  c.  454,  did  not 

of  entry  to  foreclose,  the  defendant  transfer  their  property  to  the  cor- 

cannot  object  to  the  introduction  in  poration  without  a  formal  convey- 

evidence  of  a  bond  corresponding  ance. 

to  that  described  in  the  condition  of  3  Merrill  v.  Mclntire,  ubi  supra. 
the  mortgage,  except  in  being  for  a  4  Stein  and  wife  v.  The  Indian- 
less  sum,  and  dated  one  day  later.  apolis  Building  Loan  Fund  and  Sav- 

*  Merrill  v.   Mclntire,   13    Gray  ings  Association,  18  Ind  237. 

(Mass.),   157.     But  in  Manahan  v.  6  Melville  v.  The  American  Bene- 

Varnum,  11  Id.  405  (cit.  Holland  «.  fit  Building  Association  et  al.,  33 

Cruft,  3  Gray,  173;  Lefflngwell  t>.  Barb.  (N.  Y.)  103. 

Elliott,  8  Pick.  455),  it  was  said  that  « Bibb  County  Loan  Association 

the  organization  of  a  voluntary  loan  v.  Richards,  21  Ga.  592. 


INDEX. 

> 
The  References  are  to  Sections. 

A. 
A  BATEMENT 

for  misnomer,  none  (see  AMENDMENT) 257 

distinction  between  plea  in  bar  and  plea  in 261  r». 

when  plea  of  nul  tiel  corporation  is  plea  in 261  ra, 

on  premium 399-400 

ABBREVIATION 

of  defendant's  name  in  proof  of  service  of  writ 257 

ABROGATION  OF  CONTRACT 

tee  OBLIGATIONS  ;  DUTIES  OF  MEMBERS. 
none    by  subsequent  illegal  conduct  of  society  or  offi- 
cers  289,  303,  305,  309 

of  borrower,  by  premature  dissolution 386,  476, 496-503 

see  CONCENTRATION ;  DISSOLUTION;  FORFEITURE  OF  CHARTER. 
ABSENCE 

of  funds,  when  no  defence  against  withdrawing  member's 

claim 139 

of  director  from  board-meeting,  when  no  excuse  from  lia- 
bility   210 

ABSOLUTE 

assignment  of  stock  may  be  shown  to  have  been  merely 

as  collateral 380  n.,  452  n. 

liability  for  dues  is,  only  when  whole  stock  subscribed, 

unless  waived 85,  442,  451 

ABSORBING 

of  stock  and  securities  by  one  person  dissolves  society 476 

ABUSE 

see  MISUSE. 

of  power  does  not  ipso  facto  dissolve  society 473 

of  power,  renders   society  liable   to   forfeiture  of  char- 
ter  285,286,325 

see  ULTRA  VIRES. 

of  power  of  lending,  when  no  defence  to  enforcement  of 
contract 288 

$27) 


628  INDEX. 

ACCEPTANCE 

of  alteration  of  charter  by  legislature,  discretion  of  society 

as  to 65 

of  alteration  of  charter  by  legislature,  must  be  unqualified,    65 
of  alteration  of  charter  by  legislature,  necessary  to  make 

new  grant  operative 65 

of  alteration  of  charter  by  legislature,  when  to  be  filed  in 

writing 65 

of  dues    estops   society  from   denying  payer's  member- 
ship  79, 176,  431 

of  dues  to  be  waiver  of  forfeiture  must  be  clearly  the  so- 
ciety's act 80 

of  special  terms  of  repayment,  by  member,  necessary  to 

benefit  by  them 171 

of  tender,  starts  running  of  interest 178,377,437 

of  illegal  votes  at  election,  effect  of. 188 

of  official  bond,  what  is 216 

see  APPROVAL. 

of  agent's  acts  ultra  vires,  effect  of. 247 

ACCESS 

to  corporate  books,  members'  right  of. 114 

ACCIDENT  AND  MISTAKE 

error  in  mortgage  through,  may  be  corrected 420 

ACCORD  AND  SATISFACTION 

case  of,  made  out  upon  compromise  between  society  and 

borrower 109 

is  a  bar  to  recovery  of  usury 360 

ACCOUNT 

of  first  known  building  association 5 

sureties  not  discharged  by  society's  neglect  to  enforce,  from 

officers 217 

overdrawing  of,  at  bank,  is  not  borrowing 294,  300 

court  of  equity  may  call  redeemed  members  to,  and  settle 

up  business 483 

liability  of  directors  to,  for  waste  and  misapplication  of 

funds 212 

between  society  and  borrower,  credits  upon 156 

upon  forced  repayment 176 

preliminary,  in  equity,  to  or- 
der of  sale,  items  of... ..177,  428 

of  profits,  not  involved  in  member's  right  to  withdraw. ..128, 129 
society  not  bound  to  render  to  its  members  until 
ready  to  wind  up...!28, 150, 153,329,336,452,456,457 


INDEX.  529 

ACCOUNT— Continued. 

of  profits,  impossibility  of  society's  rendering  before  wind- 
ing up 456 

ACCOUNTS 

rules  should  provide  for  periodical  auditing  of. 54  (7) 

treasurer  must  keep 196 

by-laws  providing  for  periodical,  are  for  security  of  society, 

and  as  to  it  directory  only 217 

between  society  and  members  remain  unsettled  till  disso- 
lution  150,336 

of  serial  societies,  how  to  be  kept 180n. 

ACCUMULATED  SURPLUS 

what  is,  for  purpose  of  taxation 470 

ACKNOWLEDGMENT 

of  deed,  person  affixing  seal  may  make 234 

requisites  of. 236 

omission  of  date  in 249n. 

by  agent,  what  sufficient  to  bind  society 249 

of  receipt  of  withdrawal  notice,  not  a  promise  in  writing...  264 
of  certificate  of  incorporation,  defects  in,  do  not  avoid 
charter  collaterally 506,  513 

ACQUISITION 

of  membership,  mode  of 68 

of  real  estate  (see  REAL  ESTATE.) 

A.CTIONS 

by  and  against  building  associations 254-270 

of   assumpsit    will    not    lie    for    money   promised    as    a 

loan 124,  245  n.,  267 

what,  lie  for  refusal  of  promised  loan  (see  CASE) 124,267 

cannot  be  brought  against  individual  members  for  corpo- 
rate debt 505  n 

member  may  bring,  against  delinquent  officers,  when 124 

parties  to,  by  member  against  delinquent  officers 213 

on  restrictive  covenants  in  deed  to  society,  vendor  269 
necesssity  of  substitution  of,  where  society  ex- 
pires pending  the 270 

form  of,  where  proceeds  of  sale  do  not  cover  mortgage 

debt 429 

form  of,  on  mortgage  given  society  before  incorporation....  520 

prohibited  contracts  cannot  become  foundation  of. 287,  291 

for  recovery  of  usury  must  be  brought  within  statutory 

period 362 

2i 


530  INDEX. 

ACTIONS— Continued. 

against  society,  right  of  members  to  maintain 114,  265-268 

withdrawing  member  may  have 137 

assignee  of  withdrawal  balances,  though 

member,  may  have 137,  266 

member  cannot,  qua  ttockhokler,  have,  for 

paid  up  value  of  stock 144,265 

by  officers  for  compensation 226 

for  services  before  organization 227  n. 

by  solicitor  for  fees 214  n. 

lie  on  implied  contracts 238 

for  refusal  to  transfer  shares,  measure  of 

damages 268,  448-449 

against   member,   society   may   have,    of   assumpsit  for 

dues 85,451 

against  member,  pendency  of,  does  not  suspend  accruing 

of  dues,  fines  and  interest 91,178,377,418 

against  member,  membership  not  necessarily  extinguished 

by 176,431 

against  member  on  bond,  declaration  must  show  present 

right  of  (see  SCIRE  FACIAS) 258 

by  building  association  misnamed  in  the  contract 257 

after  incorporation,  on   mortgage 

received  before 520 

choses  in,  of  unincorporated  society,  vest  without  assign- 
ment after  incorporation 520 

choses  in,  shares  of  stock  are  akin  to 444 

tee  AFFIDAVIT  OF  DEFENCE;  ASSUMPSIT;  AUDITOR'S  REPORT; 
AVERMENTS;  CASE;  COSTS;  DISCONTINUANCE;  EVIDENCE; 
PLEADINGS  ;  TENDER  ;  VALUE  OF  STOCK. 
ACTS 

incorporation  by  special,  of  legislature 57-59 

validating  purchase  do  not  validate  mortgage  for  purchase 

money 302 

amendment  of,  not  void  for  misreciting  date  of  amended 

act „ 21  (c)n. 

later  of  two,  passed  at  same  session,  may  repeal  former...  470  n. 
providing  for  depositors  in  building  associations,  validity  of,    77  n, 
see  CONSTITUTIONALITY;  RETROACTIVE  AND  EXPOSITORY  STAT- 
UTES; STATUTES. 

criterion  of  legality  of  corporate 288 

ultra  vires,  when,  may  be    ratified   by  unanimous    con- 
sent  169,284 

ultra  vires  and  prohibited,  distinction  between 285-292,825 


INDEX.  531 

ACTS—  Continued. 

of  majority  bind  whole  corporation 181 

corporate,  what  are 186 

legality  of  officers',  not  to  be  collaterally  inquired  into 192 

prohibited  by  law  not  validated  by  charter  granted  under  it,  291 

or  charter  are  void 232 

illegal,  of  society,  no  defence  against  liabilities  incurred 

to  it 288-289 

legality  and  effect  of  certain  contracts  and 282-325 

illegal,  subsequent  to  incorporation  do  not  avoid  charter 

collaterally 508 

done  in  line  of  duty,  directors  cannot  claim  compensation 

for 227 

of  directors,  requisites  for  validity  of. 206 

see  AGENTS;  CORPORATE  MEETING;  DIRECTORS;  ULTRA  VIRES; 

UNLAWFUL  ACTS. 
ACTUAL 

fraud  not  always  necessary  to  be  shown 211 

notice  when  necessary  to  affect  holder  of  two  securities 

with  knowledge  of  junior  encumbrancer's  rights 469 

ACTUS  LEGIS  NEMINEM  INJURIAT. 174 

ADJOURNMENT 

of  meetings  regularly  called 185 

of  election  from  day  to  day 191 

of  directors'  meetings : 201 

ADMINISTRATOR  OF  DECEASED  MEMBER 

not  ipso  facto  a  member 73 

powers  and  duties  of. 73 

see  EXECUTOR;  MARRIED  WOMEN. 

ADMISSION 

of  corporate  existence,  what  is 513,515 

ADVANCED  MEMBER 
see  BORROWER. 

ADVANCEMENT 
see  LOAN. 

analysis  and  theory  of. 826-357 

manner  of  obtaining  to  be  specified  in  articles 54(4) 

construed  not  to  be  a  loan 160 

and  'loan'  used  as  synonymous  in  this  work 115 n.,  326 n, 

ADVANTAGES 

to  borrower  and  investor  in  permanent  society  strictly  so- 
called...,  46 


632  INDEX. 

AFFIDAVIT  OF  DEFENCE 

necessity  of. 258,  264,  265  n. 

estoppel  by 515 

AFFIXING 

of  common  seal 234,  235 

formalities  of. 235 

AGENCY 

presumption  as  to  extent  of. : 243,  383  n. 

existence  of. 244 

burden  of  proof  of,  when  on  party  dealing  with  society 260 

tee  AGENT. 

AGENT 

distinction  between,  of  corporation  and  private 243 

secretary  is  usually  a  general,  of  society 197 

directors  are  agents 209 

officers  are 241 

appointment  of,  need  not  be  under  seal 242 

what  is  a  valid,  in  mortgage,  to  sell 434 

who  may  become 242 

auctioneer  may  also  be  purchaser's 242 

compensation  of. 226 

authority  of,  to  convey  real  estate  need  not  be  under  seal...  235 
acts  of,    within    apparent    scope  of  authority   bind    so- 
ciety   243-246,  383  n. 

secret  instructions  to,  do  not  affect  rights  of  innocent  par- 
ties   243 

no  presumption  as  to  person's  being,  from  previous  em- 
ployment    244 

but  from  fact  of  his  assuming  to  be  with  society's  knowl- 
edge   244 

unauthorized  acts  of,  when  not  binding 245,  246,  247 

extent  and  limits  of  powers  of. 245 

powers  of,  how  far  must  be  shown 245 

presumption  as  to 243,  383  n. 

acts  of,  in  excess  of  his  own  powers 245,  246,  247 

society's  powers 247 

how  far  parties  dealing  with,  bound   to  take  notice  of 

powers  of 245 

•where  limits  of  powers   of,  are   apparent,  party  dealing 

with  agent  must  take  notice 246 

when  party  dealing  with,  must  show  agency 260 

contract  of,  how  made  to  bind  society 248,249 

personal  liability  of,  for  contracts 248,  249 


INDEX.  533 

AGENT—  Continued. 

personal  liability  of,  for  contracts  if  ultra  vires 284 

what  notice  to,  is  notice  to  society 250 

when  payment  to,  not  payment  to  society 319 

receiving  bonus  by,  for  loan,  presumption  as  to  usury 368 

survival  of  authority  of,  where  two  were  appointed 251 

execution  by  one,  of  powers  to  be  exercised  jointly 251 

delegation  of  authority  by 251 

society's  liability  for  torts,  misrepresentations,  &c.,  of. 252 

when  chargeable  with  interest  on  money  collected 253 

of  unincorporated  building  association 519 

gee  OFFICERS  ;  SUB-AGENTS. 

AGREEMENT 

of  members  to  wind  up  is  legal 172 n.,  475 

binds    consenting    member    and    his    as- 
signee  172  n.,  475 

dissolution  by 474 

to  accept  tender  starts  interest 178 

to  sell  land,  when  need  not  be  under  seal 236 

AIM 

see  DESIGN. 

ALABAMA 

building  association  statutes  in 18 

decisions  in 18n. 

powers  of  building  associations  as  to  real  estate  in 308  Jt 

ALLEGATION 

of  default  in  suit  on  member's  bond  or  mortgage 258 

ALLEGATIONS 

necessary,  in  bill  by  members  against  delinquent  officers..  213 

for  appointment  of  receiver 483,485 

of  payment  by  borrower,  certainty  required  in 260 

see  AVERMENTS. 

ALLOTTEES 

of  land  liable  for  equitable  lien  thereon  whilst  in  society's 
hands .. Ill 

ALTERATION 

of  by-laws,  articles  must  provide  for 54(9) 

of  constitution,  articles  must  provide  for. 54  (9) 

and  amendment  of  constitution,  where  incorporation  is  by 

executive 56,59 

and  amendment  of  constitution,  where  by  special  act 57, 59 


634  INDEX. 

ALTERATION— Continued. 

and  amendment  of  constitution,  where  by  decree  of  court..    60 

where  by  voluntary  asso- 
ciation      62 

of  charter  by  legislature  and  acceptance  by  society 65 

to  be  according  to  existing  forma 65 

by-laws  making,  in  prescribed  method  of  election  are  void..  277 
see  AMENDMENT. 
AMBIGUITY 

in  rules  imposing  fines  construed  in  favor  of  delin- 
quent  98,  407-409,  411 

in  provision  for  repayment,  in  favor  of  borrower.. 167, 168 

AMENDMENT 

of  constitution  or  charter  to  be  provided  for  in  articles.. ..54  (9) 
where  charter  granted  by  execu- 
tive  56,59 

where  charter  granted  by  special 

act 57,69 

where  charter  granted  by  decree 

of  court 60 

where  charter  granted  by  volun- 
tary association 62 

must  conform  with  intention  of 

legislature... 56, 57 

improper,  void 56 

of  statute  not  void. for  misreinting  date  of  amended  act.. .21  (c)  n, 

of  misnomer  of  society  in  bill  in  equity 257 

AMOT10N  OF  OFFICERS 

to  be  provided  for  in  articles 54  (6) 

liability  of  officers  to 220 

power  of,  by  whom  exercised... 220 

when  officers  may  sue  for  salary  upon  improper J&9 

"AMOUNT  OF  LOAN  TAKEN  BY  BORROWER" 

construction  of. 384 

"AMOUNT  BORROWED" 

construction  of. 385 

"AMOUNT  ACTUALLY  RECEIVED" 

loan  construed  to  mean 167, 168 

AMOUNT 

of  capital  stock,  periodical  subscription,  periodical  inter- 
est, and  loan  receivable  per  share,  to  be  set  out  in 
articles 54(5) 


INDEX.  535 

AMOUNT—  Continued. 

of  loan  members  are  entitled  to  per  share 43 

grantable  to  any  member 126 

withdrawable  by  any  member 128-131 

presently  due  on  mortgage,  rule  for  ascertaining 154-155. 

336,  375,  424,  427,  428 

presently  due  is  same  at  law  and  in  equity. 428 

where  court  may  go   beyond  mortgage  to 

find 426 

ANALYSIS 

of  theory  of  loans  or  advancements 326-357 

ANNUAL 

audit  of  accounts  to  be  provided  for  in  articles 54(7) 

meetings,  time  and  place  of,  to  be  set  forth  in  articles 54  (8) 

ANNUITIES 

principle  of,  applied  to  computation  of  present  value  of 
building  association  mortgage 154-157, 

336,  424,  427, 428 
"ANOTHER"  OFFICE 

meaning  of. ...  219 

APPLICATION 

of  loan,  society  need  not  inquire  into 116 

impossibility  to  supervise 125 

of  stock  payments  to  loan 374,455-459 

on  voluntary  repayment....!54-156, 159-164 

on  forced  repayment 175, 176 

borrower's  right  to  make 431,  453-459 

by  borrower,  binds  society 453 

forces   society   to   accept 

his  stock 453 

is  optional  with  borrower 453 

borrower's  right  of,  lost  by  assignment 

of  stock  to  third  party 458 

society's  right,  as  pledgee,   to  make,  431, 

453-454 

by  society,  must  be  prompt  and  une- 
quivocal    454 

by  society,  what  is  evidence  of. 454 

cannot  be  compelled  by  mere  stranger..  459 

who  may  demand  besides  borrower 459 

compellable  for  marshalling  of  assets  460-469 
tee  MARSHALLING  OF  ASSETS. 
of  stock  payments,  value  of  stock  for  purpose  of 455-457 


536  INDEX. 

APPLIC  A  riON—  Continued. 

of  stock  payment*,  extinguishes  membership  of  debtor.  79, 431 
order  of,  as  between  fines,  dues  and  in- 
terest     404 

of  money  to  purposes  ullra  vires  of  society,  when  treasurer 

liable  for 196 

of  money  by  treasurer  must  be  authorized  by  warrant 196 

of  directors  only  for  increase  of  stock  is  good  for  noth- 
ing  200,  443 

for    appointment  of  receiver    must    be    by  member    as 

such 488-489 

for  charter,  defects  in,  which  do  not  avoid  charter  collat- 
erally   506 

see  APPROPRIATION. 

APPOINTMENT 

of  agent  need  not  be  under  seal 235,242 

how  made 242 

to  sell,  what  a  valid,  in  mortgage 434 

of  attorney  should  be  under  seal 255 

of  receiver,  grounds  for. 483 

courts  cautious  in  exercising  power  of. 483 

who  may  ask  for 488-489 

when  equivalent  to  dissolution  of  society 502 

effect  of,  on  borrowers'  contracts 502 

APPORTIONMENT 

of  profits  in  serial  societies  (see  ACCOUNTS) 47 

of  business  to  committees  not  an  unlawful  delegation  of 

power  by  directors 204 

of  debt  between  several  securities 465n. 

APPROPRIATION 

of  advance  in  Starr-Bowkett  societies 45 

mortgage  is,  of  land  to  debt 465n 

of  funds  to  withdrawing  member's  claim,  what  is 264 

of  stock  to  loan  on  voluntary  repayment 154-156, 159-164 

on  forced  repayment,  after  default 175, 176 

right  of,  in  member  or  society 453-459 

membership  not  forfeited  where  no,  made,    79 
see  APPLICATION. 

APPROVAL 

of  withdrawal,  directors  cannot  withhold,  arbitrarily 135 

of  official  bond,  discretion  and  responsibility  of  directors 
in...  ..  216 


INDEX.  537 

APPRO  VAIr—  Continued. 

of  official  bond,  manner  of ... 216 

what  is  a  valid 216 

when  presumed 216 

ARBITRATION 

covenant  for,  in  mortgage,  valid 177  n.,  281 

desirableness  of  general  provisions  for 281 

in  English  building  associations 281 

ARITHMETICAL  PROGRESSION  IN  FINES 412 

ARKANSAS 

decisions  in 88n 

ARREARS 

building  association's  lien  on  stock  for 87,450 

member  in,  cannot  withdraw 87 

transfer  of  stock  by 87 

society  must  permit  on  pay- 
ment of 447 n.,  (sce450n.) 

payment  of,  after  preliminary  account  and  decree,  saves 

membership 177 

period  of  grace  for  payment  of,  runs  during  pendency  of 

suit , 178 

ARREST  OF  SALE 

where  period  of  default  not  properly  averred 258 

discretion  of  court  as  to  (see  EXECUTION). 

ARTICLES,  RULES,  OR  CONSTITUTION 

framing  of. 52 

when  adopted  as  basis  of  incorporation,  binding  on  society..    53 

what,  should  contain 54 

purpose  of  recording ,.....' 62 

illegal   provisions    in,  void  and   ground  of  forfeiture   of 

charter 479 

illegal  provisions  in,  do  not  avoid  charter  collaterally 507 

where  court  may  look   at,  to  ascertain  amount  due   on 

mortgage 426 

where  court  cannot  look  into,  beyond  mortgage 404  n. 

whether  trustees  or  directors  must  sign  copy  of,  where 

"officers"  required  to  sign 208 

see  BY-LAWS  ;  CONTRACTS  ;  ROLES. 

ASCERTAINING  AMOUNT  DUE  ON  MORTGAGE 

where  court  may  look  beyond  mortgage  for  purpose  of. 426 

cannot  look  beyond  mortgage 404  n, 

rule  for. 154-155,336,424,427,428 


538  INDEX. 

ASSENT 

tee  CONSENT. 

of  members  to  all  lawful  acta  of  society  presumed  (tee  DIB- 

SENTING  MEMBERS) 13, 181,  278 

of  members  to  all  valid  by-laws  presumed 271 

not  presumed  to  acta  ultra  vires 181n 

nor  to  unreasonable  by-laws 410 

if  unanimous,  may  ratify  directors'  acts  ultra 

vires  as  between  them  and  society 232,284 

makes  by-law  bad  as  such,  good  as  a  contract 278 

of  directors  should  be  given   only  at  a  regularly  called 

meeting 206 

ASSETS 

becoming  equal  to  par  value  of  all  stock,  society  expires....  473 

difficulty  in  estimating  value  of,  of  building  association 129, 

456-467 

of  insolvent  society,  fraudulent  directors  postponed  on  dis- 
tribution of. 211 

borrowing  member  entitled  to  share  in  surplus  of. 371 

disposition  of.  after  expiration  of  charter 494 

what  are  available,  of  building  association 492 

mortgages  held  by  society  are  not,  for  purpose  of  wind- 
ing up 492 

mortgages  held  by  society  are,  for  purpose  of  taxation 440 

on  premature  dissolution  chargeable  with  all  losses...496  7i.,501 
tee  DISTRIBUTION. 

marshalling  of,  as  to  stock  pledged  as  collateral  and  mort- 
gage security 460-469 

ASSIGNEE 

of  withdrawal  balances  has  same  rights  as  assignor 137 

of    member,    party    to    agreement    to    dissolve,    bound 

by  it 172  n.,  475 

of  stock  must  have  transfer  entered  on  corporate  books 446 

for  benefit  of  creditors  of  borrower,  may  compel  applica- 
tion of  stock  to  debt 4o9 

for  benefit  of  creditors  cannot  settle  up  insolvent  society...  485 
of  defunct  society  cannot  set  up  its  dissolution  as  defence 

to  its  mortgage.. 495 

ASSIGNMENT 

of  balances  due  withdrawing  member 136, 137,  266- 

title  passes  from  dying  or  resigning  to  remaining  trustees 

without 214,233 

title  passes  from  unincorporated  society  to  the  earne  when 
incorporated  without 520 


INDEX.  539 

ASSIGNMENT— Continued. 

of  lease  need  not  be  under  seal 235 

private  knowledge  of  directors  of,  of  shares,  does  not  affect 

society  with  notice 250 

married  woman  may  hold  mortgage  on  husband's  land  by..  318  n, 

of  mortgages  by  building  associations  on  expiration 332,  371 

trustees  of  unincorporated  association 519 

of  stock  to  society,  though  absolute  on  its  face,  may  be 

shown  to  be  for  collateral  security  only 380 n.,  452 

and  transfer  of  stock  (see  TRANSFER) , 445-449 

of  stock  to  society  as  collateral,  does  not  make  stock-pay- 
ments payments  on  debt 452 

of  stock  to  third  party  by  borrower  destroys  his  right  of 

applying  it  to  his  debt 458 

of  all  stock  and  securities  to  one  party,  dissolves  society...  476 
ASSOCIATION 

incorporation  by  voluntary 61 

ASSUMPSIT 

society  may  maintain  for  dues 85,451 

member  cannot  maintain  for  promised  loan 124, 245  n.,  267 

for  services  before  organization..... 227 n. 

on  implied  contracts 238,  240 

for  refusal  to  transfer  stock 448 

quantum  valebant,  whether  officers  can  maintain  for  services  226 
implied  as  to  difference  between  proceeds  of  sale  and  whole 

sum  due  on  mortgage 429 

ATTACHING  CREDITOR 

when,  takes  nothing  in  stock  pledged  to  society  (see  LEVY).  429 
transfer  of  stock,  without  entry  on  books,  good  against..  ..  446  n. 
ATTENDANCE 

of  director  at  board  meeting,  a  duty ;  consequence  of  neg- 
lect of.  210 

at  court,  director  cannot  recover  compensation  for... 227  n. 

ATTESTATION 

of  president's  signature  to  be  made  by  secretary 197 

by  agent  of  corporate  deed  "  to  be  his  act  and  deed  " 249 

ATTORNEY 

right  and  manner  of  employment  of,  by  society 255 

unauthorized  cancellation  of  mortgage  by 245 

unauthorized  placing  of  mortgage  on  record  by,  does  not 

bind  society  to  make  the  loan 267 n. 

appointment  of,  in  mortgage,  to  sell  on  default 434 

see  SOLICITOR. 


640  INDEX. 

ATTORN  E  Y-GENER  AL 

may  apply  for  forfeiture  of  charter  of  society  acting  ultra 

vires 285,325 

see  STATE. 

AUCTION 

of  money  to  be  loaned  or  advanced  in  building  societies...    42 

AUCTIONEER 

may  sign  memorandum  to  bind  purchaser 242 

AUDIT 

of  accounts,  articles  should  provide  for  periodical 54(7) 

AUDITORS 

articles  should  provide  for,  to  audit  accounts  and  inspect 

securities 54(7) 

report  of,  showing  shares  to  be  at  par,  no  ground  for  suit 

at  law  by  member  against  society  for  value  of  stock 265  n, 

AUTHENTICATION  OF  COMMON  SEAL 236,  237  n, 

AUTHENTICITY  OF  SEAL 

must  be  proved 236 

AUTHORITY 

to  act  as  agent  of  society,  how  given 242 

of  agents  (see  AGENT) 243 

of  directors  how  to  be  given  by  them 206 

AVAILABILITY 

of  special  terms  of  withdrawal  and  repayment 171-172 

AVERMENTS 

as  to  default  of  borrower  in  suit  against  him,  necessary 258 

what  sufficient  in  suit,  by  or  against  society,  as  to  incor- 
poration   261 

in  bill  for  appointment  of  receiver,  what,  necessary 483, 485 

in  bill  by  members  against  delinquent  officers 213 

of  payment  by  borrower,  when  sued,  certainty  required  in  260 
see  ALLEGATIONS. 

AVOIDANCE 

of  sales  and  purchases  of  real  estate  ultra  vires 303 

B. 

BACK-PAYMENTS  IN  TERMINATING  SOCIETIES 41 

BAILEES 

directors  as...,  209 


INDEX.  641 

BALANCES  DUE  TO  WITHDRAWING  MEMBERS 

may  be  assigned 136,  266 

rights  of  assignees  of. 137, 138,  266 

presumption  as  to 266 

BALLOT 

containing  less  names  than  necessary  is  good ;  if  more,  void  190 

BANK  ACCOUNT 

overdrawing  of,  is  not  borrowing. 294,  300 

BANKING  POWERS 

building  associations  have  none 291,310 

BANKS 

building  associations' dealings  with 319 

BAR 

distinction  between  plea  in  abatement  and  plea  in 261  n, 

when  plea  of  nul  tid  corporation  is  plea  in 261  n, 

BARGAIN 

society  has  the  power  to  make  a  bad 109  n.,  323  n, 

hardship  of,  without  fraud,  no  excuse  from 386 

BASIS 

of  general  treatise  on  law  of  building  associations 2 

of  equity  jurisdiction  in  foreclosure  of  mortgages 428 

of  taxation  on  stock  of  building  associations 470 

BEHAVIOR 

may  estop  a  party  from  denying  society's  corporate  exist- 
ence   516 

BENEFIT 

redeeming    borrower   entitled   to  same,   as  withdrawing 
member 156, 162, 163 

held  out  to  borrowers  voluntarily  repaying   cannot  be 
claimed  by  defaulting  borrower 175,457 

of  special  terms  of  repayment  cannot  be  claimed  by  mem- 
ber unless  he  has  consented  thereto 171 

BEST  EVIDENCE 

see  EVIDENCE. 
BIDDER 

highest,  entitled  to  loan  upon  giving  proper  security.... 116, 122 
BIDDING 

system  of,  in  building  associations,  for  loan  or  advance 42 

must  not  be  prejudiced  by  "fixed"  or  "minimum"  pre- 
mium   122 

»ee  MINIMUM  PREMIUM. 


642  INDEX. 

BILL  IN  EQUITY 

requisites  of,  in  action  by  member   against   delinquent 

officers 213 

requisites  of,  for  appointment  of  receiver... 483,485 

parties    to,    in    action    by   member    against    delinquent 

officers 213 

parties  to,  for  appointment  of  receiver... ..488-489 

amendment  of,  for  misnomer  of  building  association 257 

for  winding  up,  when  not  multifarious 482  T* 

when  dismissed  without  costs 489 

BILLS  AND  NOTES 

purchasing  and  discounting  of,  ultra  vires 811 

taking  of,  when  legal  and  when  illegal... 479 

see  BANKING  POWERS;  BORROWING  POWERS;  DISCOUNTING. 
BIDDING  FORCE 

of  acts  of  majority 181 

of  contract  of  loan.... 386 

BLANK 

signing  of  power  of  attorney  for  transfer  of  stock  in 445, 446 

BOARD  OF  DIRECTORS 

what  constitutes  a  legal,  for  transaction  of  business 201-203 

can  act  only  as  a  board,  regularly  assembled 206  and  note. 

see  DIRECTORS. 
BOND 

treasurer  obliged  to  give 196 

of  society  must  be  executed  by  authority  of  directors  act- 
ing as  a  board 236  n. 

of  society  executed  by  wrong  name,  action  on 257 

for  costs,  building  associations  in  Kentucky  must  give 256  n. 

to  building  associations  in  ordinary  form,  not  void  for  un- 
certainty   424 

accompanying  mortgage  is  the  principal  debt  in  law 365  n. 

stock-payments  are  not  a  credit  on 452 

what  is  not  a  variamce  between,  as  recited  in  mortgage 

and  as  shown  in  evidence 519n. 

x  official 196,215-219 

validity  of  certain  defective •  216 

for  good  behavior  in  office  does  not  cover  term  upon 

re-election;  exception 219 

sureties'  liability  upon,  strictly  confined  to  terms  of.  219 
tee  OFFICIAL  BONDS  ;  SECURITY  ;  SURETIES. 
BONDS  AND  MORTGAGES 

to  be  assessed  at  full  face  value  for  taxation 440 


INDEX.  543 

BONUS 

see  PREMIUM. 

redeeming    borrowers   entitled  to  same  as  withdrawing 

investors 162,163,430 

allowed  on  voluntary  repayment,  not  to  be  claimed  by 

defaulting  borrower... 175,  457 

for  negotiating  loan,  when  usurious 368 

BOOKS 

right  of  access  to  corporate 114 

see  CORPORATE  BOOKS  ;  PASS  BOOKS  ;  RECEIPT  BOOKS. 

BORROWED  MONEY 

building  association  not  liable  for,  when  contract  of  loan 
was  ultra  vires 299n. 

BORROWER 

foundation  of  principles  applicable  to 146-148,357 

or  advanced  member,  who  is 13,  68 

rights  of,  as  member,  not  affected  by  impossibility  of  en- 
forcing exact  terms  of  contract 76 

membership  of 146-148,  176,335,357 

conflict  of  opinion  as  to... ., 147-148 

denied  in  Virginia 482»., 

not  destroyed  by  sale  under  mortgage,  where 
whole  debt  is  collected  without  applying 

his  stock 176,431 

but  by  sale  and  application  of  stock  to  debt,  431 
may  be  preserved  after  suit,  by  payment  of 
amount  in  arrear,  as  per  preliminary  ac- 
count  177,428 

when  society  estopped  from  denying 431 

when  borrower  estopped  from  denying  (effect 

of  mistake) 81 

what  contract  destroys 476 

when  borrower  deprived  of. 147 

may  vote,  hold  office,  and  transfer  stock  s'ubject  to  society's 

lien 113,148,450 

elements  of  contract  between  society  and,  147, 149-150, 326, 421 
when  only,  may  claim  account  of  profits  from  society,  150, 156 

cannot  withdraw 147, 151,  430 

share  in  profits 147 

is  liable  to  contribution  for  society's  losses  and  expenses...  106, 

107, 152, 346 

is  liable  to  contribution  upon  his  mortgage 106, 107 

upon  what  implied  condition 496  v 


544  INDEX. 

BORROWER—  Continued. 

is  liable  to  contribution  in  permanent  societies 180 

can  claim  credit  only  for  what  he  paid  in 107 

for  dues  and  interest  actually  paid 156 

for  "fixed"  premium  illegally  exacted,  122, 397 
not  for  profits  unless  allowed  by  law  or 

rule 156 

for  same   bonus  as   withdrawing   mem- 
ber  156,162,163 

but  not  if  a  defaulter  and  sued 175,  456,  407 

is  not  intended  to  repay  before  society's  expiration 153 

but  may  repay  at  any  time 152-153 

after  payment  of  arrears  and  fines,  &c 155 

under  mortgage,  entitled  to  redeem  only  on  payment  of 

all  future  subscriptions 172 

under  mortgage,  bound  to  continue  stock  payments,  &c., 

after  repayment  of  loan 372 

is  favored  in  construction  of  provisions  for  repayments,  167, 168 
cannot  be  prejudiced  by  variance  of  contract  or  terms  of 

repayment,  after  loan ,...169,279 

may  apply  his  stock-payments  to  his  debt 431,453-459 

but  cannot  be  compelled  so  to  do  (we  APPLICATION  CF 

STOCK) 453 

may  transfer  his  stock  subject  to  society's  lien 113, 148, 450 

stock-payments    of,    not   applied    to    his    debt   as    they 

come  in 329 

Btock-payments  of,  may  be  applied  by  him  or  society 431, 

453-459 

stock-payments  of,  do  not  diminish  periodical  interest 329 

order  of  application  of,  to  dues,  fines, 

interest... 404 

stock-payments  of,  liability  for,  and  fines  and  interest  not 

suspended  by  suit.. 263,418 

may  make  tender,  before  or  after  suit 178 

must  pay  costs  in  redemption  and  foreclosure  suits 179 

losing  pass-book,  effect  of,  on 260 

declaration  in  suit  against,  what  must  be  shown  in 258 

must  show  dissolution  clearly  to  evade  liability  on  that 

ground , 262 

effect  of  dissolution  on  contract  of. 496-503 

has  nothing  to  get  on  final  distribution...- 40,328 

except  to  be  released  from  his  obligations 40 

shares  of,  may  be  regarded  as  sunk  in  capital  stock 371 

but  entitled  to  share  in  surplus  assets 371 


INDEX.  545 

BORROWER— Continued. 

and  interest  of,  in  society,  continues 147,335 

rights  of,  after  hypothecation  of  stock 113, 148,450 

uncertainty  of  undertaking  of. 336 

is  estopped  from  denying  his  membership,  exception 81 

society's  corporate  existence 85  n., 

513,  516 
legality   of   security   taken    by 

society... 31? 

or  of  loan  to  him 5H1 

may  recover  usury  paid 359,  360  (but  sfe  361)- 

who  is,  so  as  to  be  entitled  to  defend  on  ground  of  usury..  363' 
is  entitled  to  lowest  premium  he  can  get  by  competition...  395- 
liable  for  difference  between  proceeds  of  sale  under  mort- 
gage and  whole  sum  due -12i': 

not  relieved  from  his  obligations  by  other  members'  refusal 

to  pay 499 

effect  of  appointment  of  receiver  on  contract  of. 502 

when  cannot  petition  for  winding  up  because  stock  at  par..  491 
terms  of  repayment  upon  death  of,  and  sale  of  mortgaged 

premises 174 

building  association  is  not  a,  from  its  members.. 456. 

see  BORROWERS;  BORROWING  MEMBERS;  INFANTS;  LOANS; 

MARRIED  WOMEN;  REPAYMENT. 
BORROWERS 

all  members  originally  were  intended  to  become 40,313 

advantage  to,  in  permanent  societies 46 

liabilities  of,  in  permanent  societies 180 

infants  and  married  women  as 70 

entitled  to  priority  on  distribution  of  assets  of  insolvent 

building  association 486 

two  cardinal  principles  concerning 857 

cannot  force  investors  to  withdraw 17£ 

BORROWING  MEMBERS 

relation  of  investing  members  and,  to  scheme  and  defini- 
tion of  building  association  41 

distinction  between  investing  members  and,  no  basis  for  a 

classification  of  membership 68 

BORROWING  MONEY 

overdrawing  of  bank  account  is  not 294,300 

to  lend  to  members,  declared  illegal 301 

formerly  allowed  in  Maryland 801 

ultra  vires,  can  never  make  society  insolvent.. 489 

2K 


646  INDEX. 

BORROWING  POWERS 

of  infants  and  married  women,  limits  of. 70 

of  building  association 293-302 

strictly  construed 298 

English  doctrine  as  to 299-300 

American  doctrine  as  to 301 

extent  of.. 301 

extent  of  where  given  "for  the  pur- 
poses of  the  society" 307 

directors'  liability  in  the  absence  of..  198 
see  INSOLVENCY;  LENDER;  ULTRA  VIRES. 

"BOUGHT  OUT,"  OR  "REDEEMED" 

signification  of  terms , 18 

BOWKETT  SOCIETIES 44 

BREACH 

of  contract,  member  may  sue  for,  where  promised  loan  is 
subsequently  refused 124, 267 

of  trust,  directors  liable  for 209 

BROOKLYN    BUILDING   AND    MUTUAL    LOAN    FUND 

ASSOCIATION 
the  first  building  association  in  America 6 

BUILDING 

see  REBUILDING. 

BUILDING  ASSOCIATIONS 

an  institution  in  modern  society 1 

basis  of  general  treatise  on  law  of. 2 

difficulties  in  harmonizing  law  of. 8 

early  history  of. 4 

account  of  first  known,  Greenwich  Union  Building  Ass'n..      5 

Earl  of  Selkirk's  not  the  first 5n. 

history  of,  in  America... 6 

period  when,  became  general  in  America 6 

present  prevalence  and  importance  of..  .., 6 

primary  design  of. 7, 39  n.,  40, 75,  113,118-120,478 

description  of  general  working  of. 8-11 

explanation  of  terms  used  in  business  of  («ceTERMiNOLOQY).12-14 

descriptive  names  of. 15 

statutes  of  various  states  for  incorporation  and  regula- 
tion of. 18-38 

purpose  to  aid  in  acquisition  of  dwellings  an  essential  ele- 
ment in 39  n.,  118 

definition  ot 89-40 


INDEX.  517 

BUILDING  ASSOCIATIONS— Continued. 

for  whose  benefit  scheme  of,  designed 40 

period  of  maturity  of,  how  described 40 

relation  of  borrowing  and  investing  members  to  scheme 

of. 40 

varieties  of. 41-47 

see  BOWKETT  (44) ;  PERMANENT  (46) ;  SERIAL  (47) ;  STARR- 

BOWKETT  (45);  TERMINATING  (41);  SOCIETIES. 

preliminary  expenses  in  formation  of,  rules  as  to 50 

society  not  liable  for,  after  incorpora- 
tion     50 

formation  of  (see  FORMATION;  INCORPORATION) 50-67 

choice  of  name  of,  rules  as  to 51 

framing  of  rules,  articles,  or  constitution  of. 52 

what  rules,  articles,  or  constitution  of,  should  contain 54 

various  methods  of  incorporation  of. 55-62 

incorporation  by  existing  constitution  and  by-laws 58,521 

membership  in  (see  MEMBERSHIP ;  MEMBER;  BORROWER). .68-81 

policy  which  created 75,478 

cannot  become  member  in  another .75,319 

depositors  in 77 

evidence  of  membership  in 78 

membership  in,  how  terminated 82 

powers  of,  when  organized  with  deficient  stock  subscription,    85 

may  maintain  aesumpsit  for  dues 86,  451 

lien  of,  on  stock  of  members  for  arrears,  etc 87,450 

debts  of,  personal  liability  of  members  for 110,111 

may  be  dissolved  at  instance  of  members 114 

what  societies  are  not 118 

duties  of,  to  the  public  and  state 118,119 

are  not  mere  savings  institutions 119 

nor  banks  of  deposit 128 

what  are  unlawful  practices  of. 120 

need  not  inquire  into  application  of  loan.. 125 

membership  in,  akin  to  partnership 127,485,517 

are  partnerships  with  corporate  rights 485,517 

trust  relation  of,  to  members 128,456 

not  bound  to  account  for  profits  before  termination 128, 129 

enterprise  of,  to  be  judged  as  a  whole 129 

nature  of  business  of,  requires  full  course  to  be  run  before 

accounting 129 

uncertain  character  of  property  of 129 

may  be  bound  by  extra-statutory  terms  of  withdrawal 133 


548  INDEX. 

BUILDING  ASSOCIATIONS-Cbn/tmmi. 

cannot  impose  restrictions  upon  withdrawal  contrary  to 

statute  or  charter 133 

must  keep  funds  available  for  withdrawing  member 139 

mutuality  of  scheme  of. 129,146-148,226,329,335,361, 

386,  401,  414,  415,  456,  496,  497,  498, 501 

borrower's  contract  with... 147,149-150,326,421 

estopped   from   rescinding  resolution   to   prejudice  of  a 

member  who  acted  upon  the  faith  of  it 170 

estopped  from  denying  borrower's  membership  nfter  col- 
lection of  loan  and  receipt  of  dues t 176 

when  settling  with  members  on  certain  basis,  cannot  deny 

it  to  any 172 

bound  by  principle  that  lawful  acts  of  majority  hind  all....  181 

supreme  power  in,  vested  in  corporate  meeting 181 

not  dissolved  by  failure  to  elect  officers.... 188 

business  and  government  of,  entirely  in  hands  of  officers...  193 

usual  officers  in 194 

character  and  purpose  of,  cannot  be  changed  by  directors..  200 

speak  through  president  and  secretary 208 

may  compel,  in  equity,  directors  to  account  for  waste  and 

misapplication  of  funds 212 

general  powers  of. 231-281 

have  no  right  to  depart  from  legitimate  course  of  business,  232 

contracts  of,  how  executed 234-237 

liability  of,  upon  implied  contracts. 238 

contracts  of,  may  be  struck  directly  by  society  or  through 

agents 239 

generally  made  through  agents 241 

right  and  liability  of,  to  suits  and  actions  (see  ACTIONS). ..254-270 

suing  in  Kentucky,  must  give  bond  for  costs 256  n. 

must  be  party  to  certain  actions 269 

criterion  of  legality  of  acts  of. 283 

power  of,  to  pass  by-laws 271-281 

may  waive  their  own  rules 288 

not  empowered  to  do  banking  business 291,  310 

cannot  be  held  on  prohibited  contracts 292 

cannot   borrow   money  without  express  authority  there- 
for  293-302 

power  of,  to  acquire  and  hold  real  estate 303-308 

does  not  extend  beyond  statutory  and  charter 

limit 303 

cannot  traffic  in  their  own  stock 801 


INDEX.  519 

BUILDING  ASSOCIATIONS— Continued. 

cannot  invest  with  other  building  associations 75,  319 

cannot  lend  to  other  corporations 319-321 

liable  to  State  for  unlawful  departure  from  powers  granted..  325 
peculiarity  of  character  of,  as  shown  in  transaction  of  loan 

or  advancement 326-328 

customary  security  for  loans  in 380 

may   apply  borrower's    stock-payments  to  his    debt  (see 

APPLICATION) 431 

being  mortgagee,  may  exercise  all  powers  concurrently, 

notwithstanding  its  rules 434 

cannot  be  appointed  trustee  in  mortgage  to  sell 434 

action  against,  for  refusal  to  transfer  stock  on  books 448-449 

is  not  a  borrower  from  its  members 456 

taxation  of  stock  of. 470 

dissolution  of,  and  effects  of  dissolution 471-503 

bound  to  work  out  a  certain  task  before  voluntary  dissolu- 
tion   474 

concentration  of  stock  and  securities  in  one  person  dis- 
solves     476 

insolvency  of .485-487 

what  is 488 

collateral  inquiry  into  corporate  existence  of 504-516 

see  CHARTER;  CORPORATE  EXISTENCE;  Nur,  TIEL  CORPORA- 
TION. 

unincorporated 517-521 

BUILDINGS 

when  society  has  right  to  erect 301 

BURDEN  OF  PROOF 

of  agency,  when  on  party  dealing  with  supposed  agent 260 

under  plea  of  payment 260 

of  maturity  of  stock,  on  borrower  defending 260,  493n 

of  losses  to  be  set  off  against  withdrawing  member's  claim, 

is  on  society 264n 

BUSINESS 

general  place  of,  of  society  should  be  provided  in  articles..54  (1) 

what,  transacted  at  general,  what  at  special  meetings 182 

members  bound  to  take  notice  of  character  of,  at  general 

meeting 183 

of  society  entirely  managed  by  directors  and  officers 193 

of  directors  may  be  apportioned  among  committees 204 

temporary  suspension  of  society's,  does  not  abrogate  bor- 
rower's contracts 500 


650  INDEX. 

BY-LAWS 

general  discussion  of 271-282 

enactment  of,  etc.,  to  be  provided  for  in  articles 54  (9) 

nature  and  qualification  of  right  of. 271 

by  whom  may  be  passed 271 

belongs  to  corporate  meeting 188,  271 

is  usually  left  to  directors 188  n.,  271 

after   notice   to   withdraw,  not  binding   on 

withdrawing  member 136n 

legality  of,  criterion  of,  generally 271,  272-278 

where  incorporation  by  special  act,    59 

when  left  to  the  jury 274 

conformity  of,  necessary,  with  intention  of  legislature,  spirit 
of  enactment,  and  charter,  and 

purpose  of  society 57,  273-277 

with    constitution    and    laws    of 

U.  S.,  etc 272,  348 

with  reason  and  equity 278 

with  interests  of  society 280 

void,  when 371-331 

if  in  violation  of  charter 275,518 

if  against  common  right 278 

if  inconsistent  with  any  existing  statute 348,  479 

generally,  if  prohibiting  member  from  pursuing  legal 

remedies 281 

if  contrary   to   intention   of   legislature,  charter  or 

purposes  of  society 57,  273-277 

if  plainly  contrary  to  interests  of  society 280 

reason  and  equity 278 

may  be  void  as  a  by-law  but  good  as  a  contract 278 

only  against  strangers  and  dissenting  mem- 
bers   278 

providing  for  regular  accounts  are  for  security  of  society, 

and  as  to  it,  directory  merely 217 

cannot  impair  vested  rights 278 

have  retro-active  efficacy 279 

add  to  borrower's  contract 279 

must  regulate  fines  (see  FINES) 98,  406 

forfeitures  of  stock  and  membership 101 

relating  to  withdrawals,  conduction  of. 134 

cannot  vary  statutory  terms  thereof  132 

when  valid  aqd  when  void 276 

in  restraint  of  transfer  of  stock 447 


INDEX.  551 

BY-LA  WS— Continued. 

if  valid  have  force  and  effect  of  legal  enactment 59 

members  bound  to  obey 83 

assent  and  submission  of  all  members  to,  presumed 

and  required 271 

if  illegal,  are  void  and  ground  of  forfeiture  of  charter 479 

but  not  collaterally 507 

cannot,  ncr  can  obligations  depending  on  them 

be  enforced 507 

signing  of,  when  waived 516 

of  unincorporated  building  societies 517 

void  if  inconsistent  with  constitution 518 

C. 
CALIFORNIA 

statutes  incorporating  and  regulating  societies  in 19 

CALLS 

notice  of,  required  by  statute  in  other  corporations,  need 
not  be  given  by  building  associations  of  stock -payments 
due 86 

CANCELLATION  OF  MORTGAGE 

unauthorized,  by  attorney,  when  set  aside 245 

by  secretary  of  unincorporated  society,  when  void 519 

CANDIDACY 

of  judges  and  inspectors  of  election 191 

CAPACITY 

of  acquiring  membership  in  building  associations 69 

CAPITAL 

declaring  dividends  out  of  (see  DIVIDENDS) 211,  487 

deficient  subscription  of,  when  waived  as  a  defense. ..288  andnct* 
see  CAPITAL  STOCK  ;  ESTOPPEL  ;  STOCK  ;  WAIVER. 

CAPITALISTS 

building  associations  not  designed  for 40 

CAPITAL  STOCK 

what  meant  by,  in  building  associations 12 

definition  of. 441 

difference  and  analogy  between,  of  building  associations 

and  other  corporations 451 

amount  of,  should  be  set  forth  in  articles 54  (2) 

how  increased 200 

cannot  be  changed  by  directors 200,  443 


552  INDEX. 

CAPITAL  STOCK— Continued. 

subscription  of  whole,  why  a  condition  precedent  to  organ 

ization  and  liability  for  dues 85 

objection  to  want  of,  may  be  waived,    85 

what  is,  for  purposes  of  taxation 470 

CARDINAL  PRINCIPLES 

two,  concerning  loans  and  borrowers 357 

CASE 

action  on  the,  for  breach  of  contract  in  refusing  promised 
loan 124,  267 

for  refusing  transfer  of  stock  on  books 448 

CASES 

on  theory  of  loans  or  advancements  collected... 338-353  and  notes. 

on  usury  collected 364  n. 

on  computing  present  value  of  mortgage  collected 154  n. 

CASH 

dues  and  fines  payable  in 93  n.,  217,  401  n. 

treasurer  cannot  receive  anything  but,  for  fines  and  dues...  451  n. 

actuafly  received,  when  loan  recoverable  confined  to.. ..384,  385 

premium  not  a  payment  of. 388,  390 

CASTING  VOTE 

by-law  restricting  officer  to,  void 277 

CAVEAT  EMPTOR 252 

CERTAINTY 

necessary  in  rules  as  to  fines 98,407-409,  411 

required  in  borrower's  allegations  of  payment 260 

CERTIFICATE 

of  incorporation,  defective  execution  of,  may  avoid  charter,  208 
defects  in,  not  available  collaterally 506 

of  stock,  effect  of  possession  of,  as  evidence  of  owner- 
ship  446,447 

see  SHARES  ;  STOCK  ;  TRANSFER. 
CESSATION  OF  MEMBERSHIP 

upon  notice  of  withdrawal 108  n. 

see  MEMBERSHIP  ;  WITHDRAWAL. 
CHANCERY 

tee  COURTS  ;  EQUITY. 
CHANGE 

in  value  of  stock,  effect  of,  on  borrower's  obligations...  171, 172, 

496-503  and  note. 

in  amount  of  capital  stock  not  ordinarily  within  power  of 
directors 200 


INDEX.  553 

CHANGE  -  Continued. 

in  board  of  directors  necessitates  no  new  notice  to  bind 

society 250 

of  name  of  society  cannot  alter  powers  thereof 306 

of  character  and  purpose  of  society,  does  not  destroy,  ipso 
facto,  its  corporate  existence,  or  duties  of  members  under 
rules 200  n. 

CHARGES 

standing  against  member  defeat  right  of  withdrawal  and 
repayment 155 

of  negotiation  of  loan  and  search  of  title  not  usuri- 
ous  214  n.,  368 

CHARTER 

as  distinguished  from  constitution,  where  incorporation  by 

patent 56 

where  by  special  act 57 

where  by  decree  of  court,    60 
where  by  voluntary  asso- 
ciation      62 

what  is,  where  incorporation  is  by  patent 56 

where  by  special  act ;  embraces  constitution 57 

where  by  decree  of  court 60 

where  by  voluntary  association 62 

purpose  of  recording 62 

is  a  contract  between  state  and  society •  65 

extent  of  such  contract 478 

alteration  of,  by  legislature  (see  ALTERATION) 65 

by  amendment:  see  ALTERATION ;  AMENDMENT. 

impeachment  of,  cannot  be  made  collaterally 63,  475  n 

481,  504,  506,  507,  508 

estoppel  against  party  attempting 513-516 

forfeiture  of. 478-482 

acts  ultra  vires  are  ground  of. 285,  325 

unlawful    departure    from     powers    granted, 

ground  of. 325 

irregularity  or  fraud  in  obtaining,  ground  of..63,  480 

can  be  enforced  only  by  State 481,  504,  508 

expiration  of,  by  original  limitation,  when  takes  effect 493 

effect  of. 493,  494 

want  of  statement  of  period  of,  in  charter,  not 

a  fatal  defect,  where  fixed  by  general  law 472 

de  facto,  can  be  questioned  only  by  State 504 

obtained  by  fraud  is  binding  on  members 305 


654  INDEX. 

CHARTER— Continued. 

under  general  statutes  not  conclusive  as  to  powers  of  society,  291 

cannot  grant  powers  inconsistent  with  statute 232 

by-laws  in  violation  of,  are  void 275 

may  be  shown  not  to  be  such  as  to  make  the  society  a 
building  association  and  bring  it  under  the  protection  of 

laws 510 

provisions  as  to  withdrawal  cannot  be  varied  by  by-law 132 

CHATTELS 

shares  of  stock  are  not  properly 444 

mortgages  of,  not  included  in  statutory  provisions  having 

reference  to  mortgages  of  real  estate 419  n, 

CHECK 

what  is  embezzlement  of. 221 

CHOSES  IN  ACTION 

shares  of  stock  are  in  the  nature  of. 444 

of  unincorporated  societies,  transferred,  without  assign- 
ment, upon  incorporation 520 

CLASS 

of  persons  for  whom  building  associations  designed 118,  119 

CLASSIFICATION 

of  rights  of  members 112 

"CLERK  OR  SERVANT" 

meaning  of,  in  criminal  law 222 

CLOSING  POLLS 

discretion  of  inspectors  of  election  as  to 191 

CO-DIRECTORS 

liability  of  directors  for  acts  of. 209,210 

COLLATERAL 

impeachment  of  charter,  irregularities  not  available  for....  475  n., 

504,  506, 513 

not  allowable 63- 

rules  as  to,  the  same  under  all 

forms  of  incorporation 505- 

acts  of  corporate  meeting 184 

officers' acts 192 

validity  of  corporate  election 192 

inquiry  into  corporate  existence 63,  475n.,  481, 

504,  508,  512,  513 
validity  of  charter..63;  475 n.,  481,  504,  508,  512,  513 

security,  custom  of  building  associations  as  to.- 149 

in  what  sense  mortgage  is 429- 


INDEX.  555 

COLLATERAL—  Continued. 

security,  rights  of  stockholder  over  stock  pledges  as 450 

attaching  creditor  over  same 450 

absolute  assignment  of  stock  may  be  shown  to  be 

merely  as 380  n, 

see  ASSIGNMENT. 
COLLECTION 

of  loans  on  default  to  be  provided  for  in  articles 54  (5) 

COLLECTOR 

see  COUNTY  TAXATION. 
COMMITTEE 

managing  formation  of  society  liable  for  preliminary  ex 

penses 50 

apportionment  of  business  to,  by  directors,  not  an  unlaw- 
ful delegation  of  authority 204 

COMMON  LAW 

of  each  state  an  essential  part  of  its  laws 272 

COMMON  SEAL  (see  SEAL) 234 

COMPENSATION 

of  officers  and  directors  to  be  provided  for  by  articles 54  (6) 

general  discussion  of. 223-230 

how  fixed 223 

when  regulated  by  directors 199 

when  cannot  be  increased 223 

when  additional,  cannot  be  claimed 
on  enlargement  of  duties  of  office,  224 

implied  liability  of  society  for 226 

moral  obligation  for 226  * 

by-laws  changing,  when  fixed  by 

charter,  void 277 

annexed  to  office  can  be  drawn  only  by  de  jure  officer 228 

officer  improperly  removed  may  sue  for  229 

de  facto  officer  can  claim  only  by  express  contract 228 

contract  for,  with  de  facto  board  of  directors,  when  valid 

after  services  performed 225 

directors  cannot  claim  extra,  for  service  in  line  of  their 

duties 227 

but  for  extra  services 227 

resolution  for  extra,  to  director  when,  is  without  considera- 
tion, and  does  not  bind  society 227 

for  services   before  organization    cannot   be  saddled  on 
society 227 


556  INDEX. 

COMPENSATION— Continued. 

of  solicitor  214n, 

of  surveyor 214  n. 

COMPETITION 

in  bidding  must  be  free 122,  394-397 

rule  for,  among  withdrawing  members,  for  priority  of  pay- 
ment, when  void 132,  27€ 

COMPLAINT 

requisites    of,   in  action  by  member  against  delinquent 

director 218 

see  ACTIONS  ;  DECLARATION  ;  DEFAULT  ;  MEMBERS. 
COMPLIANCE 

necessity  of  substantial,  with  requirements  of  general  law 

in  process  of  incorporation 63 

COMPROMISE 

between  members  and  society,  legality  of 323 

terminates  liability  to  contribute 109 

operates  as  estoppel  upon  society 109 

imprudence  of,   no  ground  for  disre- 
garding   109 

when  society  bound  by 133,  169,  170,  290 

cannot  be  forced  upon  member 171 

member  must  cdnsent  to,  to  benefit  by,  171 
when  repudiating  member  entitled  to 

benefit  of. 133,  172 

when   partly   executed,  cannot  be  re- 
scinded   290 

power  to,  involves  power  to  remit  pre- 
miums   399 

bars  right  to  recover  usury  deliberately  embraced  in 360 

COMPUTATION 

rule  for,  of  amount  due  on  mortgage 154-155,  158-164 

175,  177,  336,  375,  424,  427,  428 

same  at  law  as  in  equity 428 

of  assets  for  winding  up 492 

CONCEALMENT 

effect  of  fraudulent,  on  sureties  on  official  bonds 217 

CONCENTRATION 

of  stock  and  securities  in  hands  of  one  person  dissolves 

building  association .476,  497 

tee  ABROGATION  OF  CONTRACTS. 

CONCURRENT  REMEDIES  ON  MORTGAGE...,  ..  436 


INDEX.  557 

CONDITIONAL  NATURE  OF  STOCK  SUBSCRIPTION... 85,  441 

CONDITIONS 

of  issue  of  shares  to  be  set  forth  in  articles 54  (3) 

CONDUCT 

estoppel  by,  from  denying  society's  corporate  existence 516 

CONNECTICUT 

decisions  in,  relating  to  building  associations 38  n, 

cases  on  loans  or  advancements 353 

CONNIVANCE 

at  fraud  makes  directors  personally  liable 209 

of  directors  with  defaulting  officers,  a  ground  for  appoint- 
ment of  receiver 483 

CONSENT  (see  ASSENT) 

contracts  requiring,  of  directors  not  binding  if  made  by 

secretary  alone 197 

of  member  to  organize  with  deficient  capital,  estops  him 
from  denying  propriety  of  organization  and 

powers  of  society 288  andnote. 

to  dissolve  binds  assignee  of  his  stock 475 

unanimous,  of  members,  ratifies  acts  of  directors  ultra  vires, 

as  between  them  and  society....  169, 

232,  284,  307  and  note, 
to  proceed  with  deficient  stock, 

effect  of. 442 

whether  required  to  dissolve  pre- 
maturely   474 

to  dissolve,  when  may  be  inferred.  476 
CONSTITUTION 

articles  or  rules,  framing  of. 52 

importance  of  drawing  with  care 52 

what  is 52 

as  distinguished  from  charter,  where  incorporation 

is  by  special  act 57 

where  incorporated  under  general 

act 59 

where  by  decree  of  court 60 

where  by  voluntary  association. ...61,  62 

is  binding  upon  society  and  members 53,  56,  83 

amendment  of. 56,  60-62 

what,  should  contain 54 

criterion  of  legality  of,  where  incorporation  by  patent 56 

by  special  act 59 

under  general  statute 60-62 


558  INDEX. 

CONSTITUTION-Om/tTmed. 

if  such  as  to  defeat  purpose  of  making  members  land- 
holders, void 118 

illegal  provisions  in,  void  and  ground  of  forfeiture  of  char- 
ter   479 

purpose  of  recording 62 

tee  CHARTER  ;  ARTICLES. 

of  unincorporated  building  association 517 

CONSTITUTION  AND  BY-LAWS 

incorporation  by  existing 58,  521 

CONSTITUTIONAL  RESERVATION 

of  power  to  alter,  modify  and  repeal  charters,  effect  of. 65 

CONSTITUTIONALITY 

of  retroactive  and  expository  acts 66 

of  curative  acts 511 

CONSTRUCTION 

put  upon  statutes  by  courts  cannot  be  changed  by  legisla- 
ture     66 

of  statutes  enabling  infants  and  married  women  to  become 

members 70 

of  act  validating  purchases  of  real  estate  by  building  asso- 
ciations   302 

of  provisions  as  to  withdrawal 134 

repayment 167,  168 

fines 407-409,411 

of  by-laws,  in  the,  practical  results  must  be  considered 274, 

349-350 

of  borrower's  liability  under  "  rules  for  the  time  being" 279 

of  "amount  of  loan  taken  by  the  borrower"... 384 

of  "  loans  advanced,"  "  sums  paid  or  advanced,"  "  amount 

borrowed" 385 

of  constitution  of  unincorporated  building  association 517 

CONSTRUCTIVE 

fraud 211 

notice :  see  NOTICE  ;  RECORDING. 

CONTINUANCE 

of  member  in  society  part  of  his  original  contract 127 

of  society,  how  far  an  element  in  borrower's  liability  for 

losses 496  n. 

terms  involving,  cannot  be  forced  on  investors 
by  borrowers 173 


INDEX.  559 

CONTRACT 

right  of  corporation  to  make  imprudent,  cannot  be  con- 
trolled  109».,  323?i 

of  loan  or  advancement  between  borrower  and  society, 

elements  of. 147,  421 

extent  and  validity  of 357 

within   statute,   absolutely   binds  all    parties    in 

interest 386 

does  not  contemplate  return  of   money   before 

society's  expiration 153 

not  affected  by  illegal  conduct  of  officers,  mem- 
bers, or  society 172,  289,  303,  305,  309,  481,  508 

how  affected  by  dissolution  or  its  equivalent.. .496-503 

between  society  and  sureties  on  official  bonds 217,  240 

to  be  signed  by  president 195,  237  n. 

what,  secretary  may  make 197 

power  and  extent  of  power  of  building  association  to 232 

of  directors,  validity  and  proof  of,  how  far  dependent  on 

minutes 205 

where  their  assent  was  given  separately 206 

directors  may  become  parties  to,  with  society 207 

under  seal,  when  must  be 235,  237 

manner  of  executing  (see  SEAL) 2377k 

when  society  estopped  from  denying  execution  of. 236 

may  be  made  by  society  directly  or  through  agents 239 

by  agents,  how  made  to  bind  society 248,  249 

validity  of,  if  made  by  one,  where  two  appointed.  251 
see  AGENTS. 

what,  entered  into  by  society  directly 240 

liability  of  society  on  implied 238 

legality  and  effect  of  certain  acts  and 282-325 

of,  when  left  to  jury 274 

ultra  vires,  effect  of,  on  either  party 285-292,  325 

executed  and  executory 286 

when  plea  of,  will  not  evade  ;  estoppel 236 

society  when  estopped  from  denying  execution  of. 236 

prohibited,  cannot  become  source  of  action  to  either  party..  287, 

291,292 

by  statute  or  constitution  of  state,  &c.,  not  vali- 
dated by  grant  of  power  in  charter  under  it..  291 
not  avoided  collaterally  by  acts  amounting  to  forfeiture  of 

charter 288, 481,  508 

by  illegal  conduct  of  society  or  officers 289, 

303,  305,  309 


560  INDKX. 

CONTRACT— Continued. 

ir^teriality  of  plaintiff's  understanding  of  every 230 

obligation  of,  cannot  be  impaired  by  by-law 278 

by  legislature 477 

depending  on  illegal  by-law  cannot  be  enforced 607 

of  society  to  insure,  when  lawful 383n 

of  unincorporated  building  association  not  aided  by  subse- 
quent incorporation 518-520 

see  CHOSES  IN  ACTION. 
CONTRIBUTION 

to  losses  and  expenses,  members  owe 104,  346 

in  permanent  societies 180 

ratio  of,  between  members 104 

cannot  be  evaded  by  transfer  of  stock  104 

nor  by  withdrawal 104,  105 

cannot    be     claimed     after    with- 
drawal  105  n.,  264 

liability  for,  not  affected  by  taking  loan 106, 107 

how  secured  by  borrower's  mortgage 107 

condition  implied  therein 496n 

termination  of. 108,  109 

between  allottees  of  corporate  land  subject  to  equitable  lien,  111 
directors    liable   for  acts   or  contracts  ultra  vires  cannot 

enforce,  against  members  to  cover  their  losses 198,  307 

see  EXPENSES;  LOSSES. 

of  personal  services,  members  owe  to  society 83,  103,  226 

CONTROL 

individual     members    cannot    exercise,    over    directors' 

discretion 204 

nor,  ordinarily,  can  the  court 204 

see  COURT  ;  DISCRETION. 
CONVERSION 

of  building  association  into  land  society  does  not  abrogate 

obligations  of  members 289,  303,  305,  309 

see  CHANGE  OF  NAME;  LAND  ASSOCIATION. 
CONVEYANCE 

of  real  estate  after  dissolution 494 

CORPORATE 

acts,  are  acts  of  majority  voting  at  regular  corporate  meeting  186 

contrary  to  law,  not  sustained  by  usage  or  custom 188 

books,  members'  right  of  access  to 114 

action  against  society  for  refusal  to  transfer  stock  on,  78, 

268,  448-449 


INDEX.  561 

CORPORATE—  Continued. 

books,  holder  of  stock  must  procure  transfer  on 78,  446 

society  need  not  look  beyond,  when  dealing  with 

members 78,  446 

are   evidence    of   relation    between    member   and 

society 78,  446 

provision  for  transfer  of  stock  on,  how  construed 446 

existence  not  ended  by  failure  to  elect  officers 188 

hy  illegal  change  in  character  and  pur- 
pose of  society 200  n.,  809 

nor  ipso  facto,  by  unlawful  acts 325 

nor  by  illegal  by-laws 507 

nor  by  insolvency 473 

how  sufficiently  averred   in  suits   by  and   against 

society 261 

admitted  by  general  issue 261 

admission  of,  estops  party  from  denying 513-515 

who  estopped  from  denying ....513-516 

collateral  inquiry  into,  when  not  allowable 63,  475n.^ 

481,  504,  508,  513- 

when  allowable 512: 

not  to  be  collaterally  impeached  on  trial  of  secretary 

for  embezzlement 221 

fraud  and  misrepresentation  as  to  fact  of,  may  be 

shown 512 

expiration  of  by  charter  limitation  may  be  shown...  509 

when  takes  effect 493 

impeachment  of,  state  alone  has  right  of. 504 

same  rule  as  to,  no  matter  how 

acquired 505 

events  whose  happening  ends,  ipso  facto 472,  473 

see  NUL  TIEL  CORPORATION. 

franchise,  how  forfeited 285,  325. 

funds,  directors    must    account   for    waste    or   misappli- 
cation of. 212 

in  Scotland,  liable  for  damages  to  member  injured 

by  officer's  violation  of  rules 213?x 

officers  must  look  to,  for  compensation 230 

liability,  individual  corporators  cannot  be  sued  for 505?^ 

meetings,  how  acts  of,  passed 186 

members  must  have  notice  of. 113 

right  of  members  to  attend US 

duty  of  members  to  attend 1Q£ 

IX, 


562  INDEX. 

CORPOB  ATE— Continued. 

meetings,  supreme  power  vested  in 181 

lawful  acts  bind  individual  members 181 

what  are 182 

must  be  held  in  county  where  society  located 183 

officers'  functions  in  calling,  are  ministerial 184 

regularity  of,  where  all  voters  assembled  with  or 

without  notice 184 

validity  of  acts  of,  not  to  be  questioned  collaterally  184 

adjourned,  powers  of. 185 

acts  of,  irregularly  convened,  are  void 185 

what  are 186 

principal  functions  of. 188 

have  control  over  directors 199 

have  ordaining  of  by-laws 271 

see  MAJORITY  ;  MEETING  ;  NOTICE  ;  QUORUM  ;  PROXIES. 

powers,  general,  of  building  associations 231-281 

to  be  exercised  by  directors  assembled  as  a  board...  206  n. 
conferring  authority  to  sell  real  estate,  is  exercise  of,  206  a. 
enlargement  of,  on  application  of  directors  alone, 

is  void 200 

property,  a  trust  fund  for  creditors Ill 

liable  for  corporate  debts  in  hands  of  stockholder,  111 

relations,  primary  evidence  of. 206 

seal :  see  SEAL. 
CORPORATION 

not  liable  for  expenses  before  incorporation 50 

acquires  no  exclusive  right  to  use  term  merely  descriptive 

of  locality 51 

who  composes  the,  (stockholders,  not  officers) 188,  473 

speaks  through  its  president  and  secretary 208 

general  powers  of  building  associations  as  a 231 

difference  between  agents  of,  and  of  private  persons,  as  to 

notice  of  powers 243 

where  cannot  be  trustee  in  mortgage  to  sell 434 

building  association  should  not  lend  to  another 319 

cannot  acquire  membership  in  a  building  association... 320-321 
CORPORATORS 

general  rights  of  members  as 113 

how  incapacitated  to  sue  society 144 

rights  of,   dependent  upon  continuance  of  membership 

interests 148  n. 

individual,  cannot  be  sued  for  corporate  liability  (see  COR- 
PORATE FUNDS) 505n. 


INDEX.  563 

COSTS 

in  redemption  and  foreclosure  suits 179 

after  tender  of  present  value  of  mortgage,  and  refusal  to 

accept 179,  263,  377,  437 

building  association  suing  in  Kentucky  must  give  bond  for,  256  n. 
of  negotiation  of  loan  and  search  of  title  not  usnrious..214n.,  368 

of  sale,  when  mortgagee  in  possession  cannot  claim 432 

.  when  bill  in  equity  dismissed  without 489 

COUNTY 

bound  by  remission  by  legislature  of  taxes  on  building 
association  mortgages 438 

COURT 

incorporation  by  decree  of. 60 

may  define  purpose  of,  where  omitted  in 

petition 60,  273 

not  to  be  controlled  by  legislature  in  interpretation  of  laws,    66 
cannot  control  discretion  of  members  desiring  to  continue 

society 173 

cannot  declare  ticket  defeated  by  illegal  rejection  of  votes, 

elected 188 

cannot  enlarge  corporate  powers  on  application  of  direct- 
ors alone 200 

nor  increase  capital  stock  on  such  application 443 

cannot  ordinarily  control  discretion  of  directors 204 

but   may,   in   certain   cases,   compel   reasonable  exercise 

of  it 135,199 

director  cannot  recover  compensation  for  attendance  at....  227  n. 

discretion  of,  as  to  forfeiture  of  charter 479 

dissolution  by  decree  of. 478-482 

see  RECEIVER  ;  DISCRETION  ;  EQUITY  ;  EXECUTION. 

COVENANTS 

in  mortgage,  member  bound  on,  after  lien  vacated 90 

repayment  of  loan..  164 
must  conform,  in  form  and  substance,  with 

statute  and  by-laws 420 

as  to  stock-payments 423 

what  are  proper 423n. 

as  to  default 425 

implied,  to  make  up  difference  between  pro- 
ceeds of  sale  and  whole  sum  due 429 

restrictive,  in  deed  to  building  association  selling  to  its 
members,  parties  to  action  on 269 


564  INDEX. 

COVERTURE 

in  some  States  no  bar  to  membership 69 

not  a  defence  against  premium,  Ac.,  after  death,  by  next 

of  kin 317 

see  MARRIED  WOMEN. 

CREDIT 

what  borrower  may  claim,  for,  on  his  debt.,107, 156,  431,  455-457 

forced  repayment 175,  457 

stock- payments  not  a,  upon  loan 452 

rights  of  assignee  of  withdrawing  member's 137,  266 

CREDITOR 

who  is,  of  society 488 

rights  of  society's,  against  corporate  property  in  hands  of 

stockholder Ill 

withdrawing    member    becomes   society's,    after    notice, 

Ac 136,  138 

assignee  of  withdrawing  member's  balances  or  credits  is, 

of  society 137,  266 

of  society  may  proceed  against  delinquent  officers 213  n, 

cannot  ask  for  appointment  of  receiver  for  insolv- 
ency  488-489 

right  of,  to  marshal  debtor's  assets 460-469 

see  ATTACHING  CREDITOR. 

CRIMINAL  CONDUCT 

cause  of  forfeiture  of  membership 100 

liability  of  officers.. 221-222 

CRITERION 

of  legality  of  acts  of  building  associations 283 

CURATIVE  ACTS 511 

CUSTODY  OF  COMMON  SEAL 

who  has 195,  234 

to  be  provided  for  in  rules 236 

CUSTOM 

cannot  sanction  corporate  act  contrary  to  law 188 

where,  admitted  as  explanatory 188 

when,  sanctions  delegation  of  authority  by  agent 251 

CUSTOMARY 

security  in  building  associations,  what  is 123,  311,  380 

not  being  exacted,  no  equity  or  presumption 
arises  against  society 311 


INDEX.  566 

D. 
DAMAGES 

member  injured  by  officer's  violation  of  rules  may,  in  Scot- 
land, look  to  society's  funds  for 21 3  n. 

as  between  innocent  parties,  which  liable  for 252 

fines  in  building  associations  are  liquidated 93,  403,  415 

measure  of,  upon  contract  to  effect  insurance 247  n.,  383 n. 

in  action  against  society  for  refusal  to  transfer 

stock 268  and  note,  449 

UATE 

misrecital  of,  of  act  amended  does  not  invalidate  amend- 
ment  21  (c.)  n. 

variance  in  consideration  and,  of  bond  and  mortgage,  245  n.,  519  n. 

omission  of,  in  acknowledgment 249n. 

defect  in,  of  certificate,  does  not  avoid  charter  collaterally,  506 

DEALING  IN  REAL  ESTATE 

impropriety  of,  as  to  building  associations 304 

illegal  and  ground  of  forfeiture  of  charter 479 

DEATH 

of  member,  status  of  executor  or  administrator  upon 73 

being  feme  covert,  see  MARRIED  WOMEN. 
of  borrower  and  judicial  sale  of  mortgaged  premises,  what 

society  entitled  to  claim  upon 174 

of  trustees,  effect  of,  upon  titles,  &c 214 

of  all  members,  or  integral  part,  works  dissolution 472 

DEBT 

relation  of  borrower's  stock-payments  to  his 452 

borrower's  stock-payments  may  be  applied  in  liquidation 

of  his 154-156, 159-164,  175, 176,  453-459 

see  APPLICATION  ;  APPROPRIATION. 

DEBTOR 

mere,  cannot  petition  for  winding  up  because  stock  at  par,  491 
gee  BORROWER. 

DEBTS 

right  of  society  to  incur 293-302 

what  are  legitimate,  of  building  associations 301 

contracted  in    purchasing    lands    ultra    vires    cannot    be 

enforced  against  society 302,  307 

DECISIONS 

of  various  States  on  building  association  law 18-38  note* 

and  Addenda. 
on  theory  of  loans  or  advancements  collected. ..838-353  and  notes 


566  INDEX. 

DECISIONS— Continued. 

on  usury  collected 364n 

on  rule  for  computing  present  value  of  mortgage  collected,  154  n 

DECLARATION 

against  delinquent  borrower  must  aver  period  of  default....  258 
by  withdrawing    member    against   society,    what    to    be 
averred  in 264 

DECLARING  OF  DIVIDENDS 

what  primary  evidence  as  to 206 

out  of  capital 211,  487 

illegality  of. 323,  324 

DECREE 

of  court,  incorporation  by 60 

upon  foreclosure  proceedings,  af*°.r  repayment, 
stands  for  performance  of  membership  duties..    89. 

428.  432 

dissolution  by 478-182 

building  association,  plaintiff  in  foreclosure,  entitled  to, 

notwithstanding  refusal  to  accept  tender 179,  437 

ezparte,  of  injunction  and  appointment  of  receiver 483 

DEDUCTION 

premium  not  a 388,  390,  391,  457 

regarded    as    a,    for    purpose    of    compu- 
tation  390  n.,  391 

of  redemption  money,  borrower  repaying  entitled  to 430 

of  charge  for  examining  title,  etc.,  not  usurious 214  n.,  368 

DEED 

of  corporation  requires  no  delivery 23/> 

acknowledgment  of,  by  agent 249 

execution  and  acknowledgment  of. 195,  234,  235 

must  be  under  seal  and  by  agent ;...  235 

where  duly  executed,  society  may  plead  want  of  power,  to 
avoid 236 

DE  FACTO 

officers'  acts  binding  on  society 192 

officers  may  maintain  trespass  against  others  claiming  to 

be  a  board  of  directors 192  n. 

cannot  claim  salary  annexed  to  office 224 

can  claim  salary  only  by  virtue  of  express  contract,  228 

board  of  directors,  when  contract  with,  for  salary,  valid 225 

corporate  existence  shown,  when  sufficient  answer  to  plea 
of  nul  lid  corporation 504 


INDEX.  567 

DE  FACTO— Continued. 

(see  NUL  TIEL  CORPORATION.) 

corporate  existence  shown,  cannot  be  inquired  into  col- 
laterally   508 

plaintiff  may  be  shown  to  be  neither  corporation  de  juret 

nor. 509 

DEFAULT 

liability  of  member  for  fines  on 92 

injury  to  society  by 93 

elements  of  borrower's  contract  as  to 149 

preliminary  account    upon    foreclosure  of    mortgage   in 

equity  after 177 

period  of,  not  prolonged  by  entry  of  suit 178 

must  be  averred  in  complaint  against  borrower,  258 

how  computed 259 

covenants  in  mortgage  as  to 425 

difference  between  repayment  upon,  and  voluntary  repay- 
ment   427 

what  credits  borrower  entitled  to  upon 175,  456,  457 

DEFAULTING  BORROWER 

can  claim  no  share  of  profits 175,  456,  457 

liabilities  of,  how  far  the  same  in  permanent  and  terminat- 
ing societies 175  r* 

DEFECT 

of  notice  of  special  meeting  may  be  waived  by  unanimous 

consent 184 

of  title,  mortgagee  in  possession  may  commit  waste  where 

there  is  a 432 

in  execution  of  certificate  of  incorporation  may  avoid  it,  208 
in  process  of  incorporation,  ground  of  forfeiture  of  char- 

.ter 208,480 

cannot  be  taken  advantage,  of 

collaterally 63,  475  n., 

481,  504-508,  512,  513 
DEFECTS 

in  obtaining  charter  which  do  not  avoid  it  collaterally 506 

in  incorporation  which  debar  society  from  assuming  the 

powers  of  a  building  association 510 

DEFENSE 

want  of  funds  available  for  withdrawals,  when  not  a 139 

when  illegality  of  society's  acts  is,  and  when  not 288,  292 

what,  may  be  made  to  mortgage  on  ejectment 311  n. 

who  may  take,  for  usury 363-365 


568  INDEX. 

DEFENSE—  Continued. 

when  rule  for  "minimum"  or  "fixed"  premium  is  a 397 

dissolution  of  society,  being  mortgagor,  is  no,  to  action  on 

the  mortgage 495 

tee  AFFIDAVIT  OF  DEFENSE. 

DEFICIENCY 

in  subscription  of  capital  stock,  effect  of.. ...86,  288  and  note,  441 

who    may    or    may    not 

object  to 288  and  note,  442 

DEFINITE  AMOUNT 

to  be  repaid  at  specific  time,  significance  of  stipulation 
for,  in  mortgage  to  society 153,  157,  331-332,  421-122 

DEFINITION 

of  building  association 39-40 

of  fines 379 

of  premium 378,  388,  398 

of  "share"  in  capital  stock 444 

of  stock 441 

of  usury 358 

DE  JURE  AND  DE  FACTO  OFFICER 

salary  annexed  to  office  goes  to  former 224 

DELEGATION  OF  POWERS 

by  directors  (appointment,  etc.,  of  committees  not  an  un- 
lawful)    204 

by  solicitor,  effect  of  unlawful 245n 

by  agents 251 

DELINQUENT 

members,  liability  of,  to  fines,  etc.,  to  be  set  forth  in  arti- 
cles  .54  (4) 

not    entitled    to   notice  when  stock-payments, 

etc.,  due... 86 

officers:  see   ACTIONS;    DIRECTORS;    OFFICERS;    PERSONAL 
LIABILITY. 

DELIVERY 

deed  of  corporation  requires  no 235 

DE  MINIM  IS  NON  CUR  AT  LEX 

does  not  apply  to  building  association  mortgages 424 

DEMURRER 

to  bill  by  member  against  delinquent  officer 213 

to  complaint  against  borrower  not  showing   period    of 
default,  Ac 258 


INDEX.  569 

DEPARTURE 

from  provisions  of  genera!  law  in  incorporation  under  it...    68 

from  prescribed  course  of  business 282,  285-292 

effect  of,  on  corporate  existence  of  society, 

and  duties  of  members 309 

penalty  of,  in  society's  liability  to  state 

for 323,  325,  478 

from  customary  security  raises  no  equity  against  society..380-381 
DEPOSIT 

society  may  make  in  bank,  and  this  is  not  loan  to  corpora- 
tion   319 

treasurer's  liability  for  loss  of. 196 

manner  of  making,  of  corporate  funds 196 

DEPOSITORS 

what  are 77 

liabilities  of. 77 

right  of  receiving,  involves  right  of  society  to  borrow 77 

bound  by  rules  to  certain  extent 77 

constitutionality  of  acts  authorizing  reception  of. 77  n. 

fines  upon 414 

DEPUTATION 

of  agent  or  trustee  in  mortgage  to  sell 434 

of  authority  by  agent,  etc. ;  see  DELEGATION. 
DESCRIPTION 

of  general  working  of  building  associations 8-11 

DESIGN 

of  present  treatise,  in  reference  to  building  associations 3 

primary  or  essential,  of  building  associations 7,  40,  75, 

113,  118-120,  283,  392,  398,  413 

acquisition  of  dwellings  an  essential  part  of. 39  n. 

tee  OBJECT  ;  PURPOSE. 

of  limitation  of  funds  available  for  withdrawals 143 

DEVIATION 

see  DEPARTURE. 

DIFFERENT  KINDS  OF  BUILDING  ASSOCIATIONS 41-48 

DILIGENCE 

degree  of,  to  which  directors  are  held 209 

DIRECTORS 

general  discussion  of. 196-216 

acts  of,  are  acts  of  corporation 198 

if  illegal,  subject  to  proceedings  by  society  and  in- 
dividual members 199,  218 


570  INDEX. 

DIRECTORS— Continued. 

acts  of,  if  illegal,  may  be  restrained  at  instance  of  members,  309 

valid  only  when  passed  by,  aa  a  board 206  and  note, 

appointment  of ,  purpose  of. 198 

method  of. 198 

compensation,  cannot  claim  for  acts  in  line  of  duty 227 

but  for  extra  services 227 

not  for  attendance  at  court 227  n» 

nor  as  reward  for  recovering  stolen  property 

of  society 227  n. 

contracts  of,  requiring  consent  of  directors,  cannot  be  made 

by  secretary  alone 197 

valid  without  minutes 205 

minutes  best  evidence  of. 206 

directors  may  be  party  to,  with  society 207 

de  facto,  contract  for  compensation  with,  when  enforced....  225 
disabilities  of:  cannot  secure  to  themselves  advantages  not 

common  to  all  members 207 

cannot    exercise  power  of   amotion    unless 

expressly  authorized 220 

cannot  delegate  powers  involving  exercise 

of  discretion 204 

cannot  authorize  treasurer  to  take  anything 

hut  cash  for  dues,  fines,  &c 217,  401  n. 

cannot  make  by-laws  unless  expressly  author- 
ized   271 

cannot  establish    "  minimum  "   or   "  fixed  " 

premium  or  refuse  bids  below  it 390- 

cannot,  of  their  own  motion,  change,  nor  ask 

increase  of  stock 200,  4i& 

cannot  exercise  discretion  wrongfully 135,  li'D 

cannot  compel  contribution  when  suffering 
under  personal  liability  for  contracts  ultra 

mres 198,307 

cannot  share  in  distribution,  on  insolvency  of 
society,  if  unfaithful,  until  all  members  sat- 
isfied  211,487 

ditcretion  of,  as  to  forfeiture  of  membership 101 

as  to  withdrawals 135 

as  to  time  and  place  of  meetings 201 

as  to  compensation  of  officers,  committees,  <fec.  223 

in  remitting  fines 418 

cannot  be  controlled  by  individual  members...  199 
nor  delegated 204 


INDEX.  571 

DIRECTORS— Continued. 

discretion  of,  may  be  compelled  by  court  to  be  exercised 

reasonably 135,  199 

and  responsibility  as  to  security  for  loans 123 

in  approving  official  bonds..  216 

dutiei  of. 198-200 

when  bound  to  allow  withdrawing  members  some 

profit 131  n 

bound  to  offer  money  in  treasury  to  highest  bidder,  395 

liabilities  of ,  personal 209-218 

incurred  by  acts  ultra  vires  entitle,  to  no  contri- 
bution from  members 198,  307 

incur  no,  for  errors  (gross)  of  judgment,  so  long 

as  they  are  honest 204,  209 

for  neglect  to  keep  proper  minutes 205 

attend  board  meetings 210 

are  those  of  mere  mandataries 209 

in  what    sense    those  of   trustees  for    mem- 
bers  207,  209,  487 

do  not  arise  where  seat  in  board  never  taken...  210 
to  account  for  waste  and   misapplication  of 

funds 212 

none  for  salaries  of  officers 230 

for  loans  contracted  ultra  vires 295,  299 ft 

for  purchases  of  real  estate 303 

to  injunction  at  instance  of  any  member  to  re- 
strain misapplication,  &c.,  of  funds 305,  309 

majority  of,  where  required  to  validity  of  acts  of. 202-203 

acts  of,  where  some  disqualified 203 

meetings  of. 201-203 

acts  of  irregular,  invalid 201 

directors  must  all  have  notice  of. 201 

when  only  majority  can  act  (see  MAJORITY). ..202-203 
liability  in  consequence  of  non-attendance  at...  210 

minutes  of ,  see  MINUTES;  SIGNING 205 

notice  to,  is  notice  to  society 250 

each  board  has,  of  what  previous  board  knew 250 

change  in  board  necessitates  no  new 250 

see  AGENT  ;  NOTICE. 

officers,  directors  are,  only  in  modified  sense 208 

powers  of,  in  granting  loans  beyond  stock  interest 126 

general  extent  of... 199 

extend  to  nearly  exclusive  management  of  busi- 
ness of  society 188 


572  INDEX. 

DI  RECTORS— Continued. 

powers  of,  depend  upon  constitution  and  by-laws 199 

are  subject  to  control  of  corporate  meeting 199 

but   not    to    interference  of   individual    mem- 
bers  199,204 

involving  discretion,  cannot  be  delegated 204 

are  those  of  agents 241 

are  such  that  directors  are  virtually  the  corpora- 
tion   241 

quorum  of ,  what  is 202 

suite  against,  by  members  must  make  society  defendant 269 

must  allege  participation  in  actions  of  board..  210 
may  be  instituted  by  members  for  protection 

of  society 199,  213,  309 

sureties,  directors  may  become,  on  officer's  bond 216  n 

trustees,  directors  as,  for  stockholders 207,  209,  487 

DISABILITY 

prohibition  of  certain  acts  create  an  absolute,  as  to  them...  287 

of  infants  as  to  loans 316 

of  married  women  as  to  loans 316-318 

DISAVOWANCE 

of  agent's  acts  ultra  vires  must  be  prompt  and  unequivocal..  247 
DISCHARGE 

of  sureties  on  official  bond 217 

of  mortgage  by  judicial  sale  on  decease  of  mortgagor, 

effect  of. 174 

does  not  necessarily  discharge  debt 429 

see  MERGER  ;  PURCHASE. 
DISCONTINUANCE 

of  suit  prematurely  brought  does  not  relieve  from  payment 
of  dues,  fines,  and  interest  during  pendency 178 

DISCOUNTING 

bills  and  notes  illegal  and  ground  of  forfeiture  of  charter....  479 
DISCRETION 

of  court  as  to  execution  against  society 137, 143,  264,  488  n, 

upon  quo  warranto,  as  to  ouster 479 

of  directors,  as  to  forfeiture  of  membership 101 

security  for  loans. 123 

granting  loans  beyond  stock  interest 126 

approval  of  official  bonds 216 

compensation  of  officers,  etc 223 

remission  of  fines 418 


INDEX.  573 

DISCRETION—  Continued. 

of  directors,  cannot  be  exercised  capriciously 135 

must  be  exercised  reasonably 199 

cannot  be  controlled  nor  delegated 204 

of  inspectors  as  to  closing  polls  at  elections 191 

DISFRANCHISEMENT 

see  AMOTION. 
DISMISSAL 

of  bill  without  costs 487 

of  officers ;  see  AMOTION. 

DISQUALIFICATION 

of  directors,  action  of  majority  of  remaining  directors 203 

DISSENTING  MEMBER 

by-law  may  be  void  as  to 278 

not  deprived  of  his  remedy  by  rule  that  assent  is  presumed,  278 

DISSOLUTION  OF  BUILDING  ASSOCIATION 

general  discussion  of. 471-503 

theoretically  occurs  as  soon  as  stock  at  par 490 

right  of  member  to  apply  for 114,  490,  491 

not  for  irregularities  in  incorporation 481  n. 

State  to  apply  for,  for  misbehavior 481,  508 

special  terms  of  repayment  offered  with  a  view  to,  avail- 
able by  all  borrowers 172 

events  which  bring  about^  ipso  facto 472,  473,  490 

does  not  occur  by  failure  to  elect  officers 188,  473 

insolvency,  misbehavior,  etc 473 

must  be  clearly  shown  to  evade  liabilities  proved 262,  499 

modes  of. 471 

by  death  of  members 472 

by  loss  of  integral  part  of  membership.. 498 

by  expiration  of  charter 472,  473,  490,  493-495 

by  voluntary  agreement  of  members  and  surrender...!72  ».,  474 

such  agreement  and  surrender  valid 172  n.,  475 

when  inferred 476,  497 

by  act  of  legislature 477 

by  decree  of  court 478-482 

members  cannot  ask,  for  irregularities  in  incor- 
poration   481  n, 

State  alone  can  ask  for  misbehavior,  <fcc 481,  508 

member  may  apply  for,  when  stock  at  par 490-491 

petition  for,  must  be  by  members  as  such 491 

when  member  cannot  petition  for , 491 


574  INDEX. 

DISSOLUTION  OF  BUILDING  ASSOCIATION— Continued. 

by  appointment  of  receiver,  being  equivalent  to 602 

by  concentration  of  stock  and  securities  in  hands  of  one 

person .476,  497 

by  withdrawals 498 

premature,  effects  of. 386,  496-503 

effect  of,  on  judgment  obtained  in  suit  pending  before,  270,  495 

on  member's  liability  to  pay  dues 496 

on  liabilities  of  society 495 

on  mortgage  giv'en  by  society 495 

on  contract  of  borrower 386,  496-503 

as  a  defense  to  debtors  of  society,  cannot  be  insisted  on 

collaterally 288,  481,  508 

must  be  clearly  shown  to  escape  debt 262,  499 

when  may  be  shown 509-512 

settlements  incident  to 494 

DISTRIBUTION 

of  society's  assets,  borrower's  interest  in  final 147-148,  371 

borrower  entitled  to  share  in,  of  surplus  371 

upon  insolvency 485-487 

order  of  priority  of  payment 486 

fraudulent  directors  postponed.. .. 

211, 487 

of  proceeds  of  sale  on  mortgage  to  society,  rule  for  ascer- 
taining amount  due  on  mortgage 154-155,  336, 

375,  424,  427,  428 
DISTRICT  OF  COLUMBIA 

cases  in,  on  loans  or  advancements 343  n. 

DIVIDENDS 

redeeming   borrower    entitled    to    same   as  withdrawing 

member 162, 163,430 

what  primary  evidence  as  to  declaring  of. 206 

fraudulent  declaring  of. 211 

declaring  of,  out  of  capital 211,  487 

declaring  of,  illegal 323,  324 

DOUBLE 

premium,  making,  on  same  money 384,  400 

assignment  of  stock,  effect  of. 458 

DOUBTS 

upon  previous  statutes  may  be  explained  by  legislature 66 

DUES 

member's  duty  as  to 84-91 


INDEX.  575 

DUES— Continued. 

stock-payments,  subscriptions,  installments,  what  meant 

by 12,  371 

amount  of,  and  details  as  to  payment,  to  be  set  forth  in 

articles 54  (4) 

receiving,  from  persons  after  suit  and  sale  estops  society 

from  denying  membership 76,  176,  431 

liability  for,  ceases  only  with  membership  and  is  absolute..84, 160 

ceases  on  dissolution 496 

not  removed  by   misbehavior,  &c.,   of  other 

members 84 

nor  by  illegal  acts  of  society  or  officers 172,  289, 

303,  305,  309 
arises  only  when  whole  capital  stock  subscribed    85 

not  suspended  by  pendency  of  suit 91,  178,  263 

ends  with  forfeiture  of  stock 102 

is  independent  of  obligations  as  borrower 372 

of  purchaser  subject  to  mortgage  to  society 

386  n.,  435 
may  be  enforced  against  member  by  assump- 

sit J 85,  451 

borrower  bound  to  continue,  to  end  of  society 160 

not  after  dissolution 496 

in  arrears,  lien  of  society  on  stock  for 87,  450 

member  not  entitled  to  notice  when  payable 86,  451 

payable  in  cash  only 93  n.,  217,  401  n, 

treasurer  cannot  receive  anything  but  cash  for 451  n, 

stipulation  for  continued  payment  of,  the  essential  feature 

of  building  association  loan 153,  422 

significance  of. 371,  372 

what  covenant  sufficient  for 423  n. 

partial  payments  of,  not  counted  in  computing  period  of 

default 259 

presumption  that  borrower's  payments  were  for 260 

order  of  application  of,  as  between  fines,  installments  and 

interest 404 

when  including  interest,  construction  of. 333,  338 

interest  or  redemption  money 373,  375,  376 

cannot  subdivided  to  impose  separate  fines,  416 
rebate  of  interest  allowed  on  repayment  of 

loan 427 

payment  of,  not  ipso  facto  payment  to  mortgage.... 374,  431,  440n^ 

452,  454-457,  462,  465,  518 
see  MARSHALLING  OF  ASSETS. 


576  INDEX. 

DUES—  Continued. 

payment  of,  credited  to  borrower's  general  account  cannot 
be  shown  by  officer  to  have  been  considered 
by  the  society  as,  in  law,  payments  to  mort- 
gage   454 

may  be  applied  by  borrower  or  society  to  his 

debt 431,  453-459 

see  APPLICATION  OF  STOCK. 

member  not  entitled  to  interest  on 456 

regular,  estops  pnrty  from  denying  society's 

corporate  existence,  when 516 

mortgage  and  decree,  after  payment  of  loan, 

stand  as  security  for 89,  90,  372,  428,  432 

see  STOCK-PAYMENTS. 
DUPLICATE 

omission  to  file,  does  not  avoid  charter  collaterally 506 

what  is,  of  certificate 21  n 

DURATION 

of  society  to  be  provided  for  in  articles 54  (10) 

where  fixed  by  general  law  omission  of,  in  charter  not  fatal,  472 
period  of,  how  described  and  fixed 474 

DURESS 

what  constitutes,  in  usurious  loans 359 

DUTIES 

of  membership  to  be  set  forth  in  articles 54  (4) 

what  are 83-111 

continue  after  illegal  change  of  purpose 

and  character  of  society 200  n.,  309 

mortgage   and    decree,  after    repayment 
stand  as  security  for  performance  of.. .89,  90, 

372,  428,  432 

payment  of  dues,  as  to 84-91 

is  one  of  the,  independent 

of  contract  of  loan,  <£c.,  455 
borrower  agrees  to  perform,  during  exist- 
ence of  society 149 

contributing  according  to  powers  to  suc- 
cess of  enterprise,  is  one  of  the 226 

of  directors  and  other  officers  to  be  set  forth  in  articles... 54  (6) 

what  are 194-230 

as  well  as  powers,  depend  on  constitution  and 

by-laws 199 

what  are  general 199 


INDEX.  577 

DUTIES—  Continued, 

of  directors  as  to  board  meetings 210 

acts  done  in  line  of,  no  ground  for  compensa- 
tion   227 

of  executor  or  administrator  of  deceased  member 74 

of  infants  and  married  women  as  members 70 

of  solicitor 214  n. 

of  surveyor 214  n. 

of  building  association  to  State  and  public 118,  119 

to  keep  funds   available  for  with- 
drawing members 139 

DWELLINGS 

acquisition  of,  by  members,  an  essential  part  of  the  build- 
ing association  scheme 39  n.,  118 

(see  DESIGN.) 

E. 
EARL  OF  SELKIRK'S 

society  not  the  first  building  association 5n. 

EARLY  HISTORY  OF  BUILDING  ASSOCIATIONS 4 

EFFECT 

and  validity  of  bond  or  mortgage  for  payment  of  dues,  &c.,  424 

of  dissolution :  see  DISSOLUTION. 

of  appointment  of  receiver:  see  APPOINTMENT  OF  RECEIVER. 

EJECTMENT 

defenses  to  mortgage  on 811  n, 

ELECTIONS 

method  and  time,  &c.,  for  holding,  should  be  provided  in 

articles 54  (6) 

general  discussion  of. 188-192 

held  in  good  faith  will  not  be  set  aside 188 

must  be  conducted  according  to  constitution  and  by-laws...  188 

when  void 188 

failure  to  hold,  does  not  dissolve  society 188,  473 

control  of  court  over,  extent  of. 188 

no  usage  can  sanction  holding  of,  contrary  to  laws 188 

by  minority 189 

notwithstanding  protest  of  majority 189 

of  less  number  of  directors  than  required,  valid ;  of  greater, 

void 190 

discretion  of  inspectors  as  to  closing  polls  for 191 

judges  and  inspectors  of,  may  be  candidates 191 

validity  of,  courts  will  not  inquire  into,  collaterally 192 

iM 


578  INDEX. 

ELECTIONS— Continued. 

what  primary  evidence  of. 206 

sureties  not  bound  where,  void 218 

by-laws  altering  prescribed  method  of,  void 277 

see  BALLOT  ;  POLLS  ;  TICKET. 

ELEMENTS  OF  CONTRACT 

between  society  and  borrowing  member.   147, 149-150,  869,  421 

EMBEZZLEMENT 

directors  liable  for 209 

what  is,  of  check  by  secretary 221 

what  constitutes,  by  officers 221-222 

ENABLING  STATUTES 

construction  of,  as  to  infants  and  married  women 70 

ENACTMENT 

of  by-laws :  see  BY-LAWS. 
ENCUMBRANCE 

purchaser  subject  to  usurious,  cannot  defend  against,  on 

ground  of  usury 365 

ENDORSEMENT 

of  transfer  on  back  of  certificate 446,  447 

ENFORCEMENT  OF  FORFEITURE  OF  MEMBERSHIP 

method,  &c.,  of,  must  be  set  forth  in  by-laws 101 

is  optional  with  society  or  directors 101 

ENGLISH 

decisions  as  to  repayment  or  redemption 159-164 

importance  of,  in  America 165 

cases  on  loans  or  advancements 338 

ENLARGEMENT 

of  corporate  powers  cannot  be  asked  by  directors  alone, 
and  if  granted  by  court  on  such  application,  is  "oid 200 

ENTRANCE  FEES 

purpose  of. ....  168 

not  recoverable  by  member  under  any  circumstances..l34  n.,  168 

ENTRY 

in  receipt  book,  how  proved 454 

mortgagee's  right  of,  after  dissolution,  on  premises  mort- 
gaged by  society 495 

right  of  society,  mortgagee,  to  maintain  writ  of,  after  illegal 
cancellation  of  mortgage < ,  519 

EQUITABLE 

assignment  of  stock,  what  is 446 


INDEX.  579 

EQUITABLE— Continued. 

considerations  for  restraining  execution  against  society  by 

withdrawing  member 138, 143 

lien  on  corporate  lands  follows  into  hands  of  allottees Ill 

for  purchase  money 302,  307n, 

title,  mortgage  of. 419n. 

when  not  defeated  by  purchaser  of  fee- 
simple 433 

EQUITIES 

none  against  society  taking  other  than  customary  security,  123 
of  borrower  repudiating  special  terms  of  repayment,  to 

benefit  by  them 172 

of  mortgagee  and  purchaser  superior  to  those  of  judgment 

creditor 467 

of  marshalling  assets 460-469 

EQUITY 

member  may  compel  settlement  with  society  in,  when 145, 

490-491 

preliminary  account  upon  foreclosure  of  mortgage  in. ..177,  428 
same  rule  as  to  computation  of  amount  due  on  mortgage 

in  law,  as  in 428 

winding  up  of  insolvent  society  should  be  in 485,  490,  501 

method  of. 485-487 

court  of,  power  of,  to  compel  reasonable  exercise  of  discre- 
tion by  directors 199 

jurisdiction  of,  to  compel  directors  to  account  for 

waste  and  misapplication  of  funds  211 
basis  of,  in  foreclosure  of  mort- 
gages    428 

building  ass'n  mortgage  properly 

within 424 

in  winding  up  building    associa- 
tions  490,501 

will  not  relieve  against  reasonable  fines 402,  415 

see  INJUNCTION  ;  RECEIVER;  MARSHALLING  OF  ASSETS. 
of  redemption  :  see  REPAYMENT. 
ERRORS 

of  judgment,  directors  not  liable  for,  if  honest 209 

and  omissions  in  mortgages,  how  and  when  cured. ..420, 433, 434 

ESSENTIAL  FEATURE 

of  building  association  scheme  (see  DESIGN) 118 

ESTOPPEL 

upon  married  woman  by  recitals  in  mortgage 71 


680  INDEX. 

ESTOPPEL—  Continued. 

upon  borrower  denying  his  membership 81 

does    not  take    place  where    mistake  or 

fraud  shown. 81  and  not* 

denying  specific  powers  claimed  by  society,  514 
denying  society's  corporate  existence..85  and  note, 

442,  513-514,  516 
setting  up  illegality  of  society's  acts  as  a 

defense 133,  288  n. 

extent  of  stock  in- 
terest as  defense,  288 
security  as    a  de- 
fense   311 

loan  to  stranger  as 

a  defense 313 

upon  member  raising  objection  to  deficiency  of  stock 85, 

288  and  note,  442,  516 
taking  advantage  of   extra-statutory  terms 

of  withdrawal,  objecting  to  their  validity,  133 
denying  corporate  existence  by  plea  ofnultifl 

corporation 85.  288,  513-514,  516 

denying  regularity  of  corporate  meeting 184 

who  agreed  to  dissolve,  disputing  legality  of 

the  act 475 

from  behavior  and  participation 516 

upon  cestui  qtie  trust,  what  does  not  create 252 

upon  party  dealing  with  society  from  setting  up  plea  of 

ultra  vires 285-292 

denying  corporate 

existence 513-516 

upon  society  from  denying  subscription  payer's  member- 
ship  79,  176,431 

after  compromise  with  member,  109,  113,  290,  399 
from  setting  up  plea  of  ultra  vires  after  settle- 
ment with  borrower 169, 170,  290,  399 

from   rescinding  resolution   acted  upon   by 

members 170 

none  arises  from  admissions  of  insufficient 

number  of  directors  to  bind  society 202 

from  denying  execution  of  instrument 236 

agency  of  person  permitted  to 

hold  himself  out  as  agent 244 

agent's  power  to  contract...247,  383  n 


INDEX.  581 

ESTOPPEL— Continued. 

upon  society  from  denying  agents  power  to  contract,  when 

executed 247 

from  setting  up  plea  of  ultra  vires  as  to  pur- 
chase-money mortgage  where  title  validated 

I  y  statute  and  contract  executed 302 

upon  mortgagor  from  denying  society's  corporate  exist- 
ence  85  and  note,  442,  514 

vendee  of,  from  same 514 

and  vendee  of,  from  denying    specific 

powers  claimed  by  society 514 

upon  defendant  who  led  plaintiff  to  a  certain  understanding 

of  their  contract,  on  which  he  acted 230 

upon  setting  up  plea  of  nul  tiel  corporation 513-516 

from  admissions 513-515 

in  note  or  mortgage 85,  514 

in  pleadings 515 

from  behavior,  participation,  <fec 516 

EVIDENCE 

corporate  books  primary,  of  membership  and  relations  be- 
tween member  and  society. ..78, 446 
of  elections,  meetings,  dividends, 

&c 206 

minutes  primary,  of  acts  and  contracts  of  directors 205,  206 

of  agent's  appointment 242 

primary,  should  be  produced 206 

when  secondary,  admissible 206 

parol,  when  admissible  to  show  agent's  contract  to  be  that 

of  society 249 

of  ownership  of  stock,  what  is 446,  447 

of  payments  must  be  clear 260 

of  officers  that  borrower's  payments  credited  to  his  general 

account,  were  considered  payments  on  loan,  inadmissible  454 
on  trial  of  secretary  for  embezzlement  of  check,  what  is...  221 

in  criminal  prosecution  against  officers 221-222 

variance  in,  what  differences  between  bond  recited  in  mort- 
gage and  bond  proved  is  not 51971 

EXAMINATION 

of  title,  charges  for  may  be  deducted  from  loan 214 n.,  368 

EXCESSIVE 

powers  granted  in  charter  under  general  statute,  void 64 

stock-interest  of  member  no  defense  to  his  obligations.......  288 


582  INDEX 

EXECUTED 

compromise  partly,  cannot  be  rescinded 290 

contracts,  when  society  cannot  deny  power  of  agent  to  make,  247 

ultra  vires 286 

tee  ESTOPPEL  ;  ULTRA  VIRES. 

EXECUTION 

discretion  of  court  as  to  restraining,  on  judgment  against 

society  by  withdrawing  member 138,  143,  264,  488  n, 

arrest  of,  where  period  of  default  not  properly  averred 258 

shares  of  stock  not  liable  to,  at  common  law 444 

upon  stock  and  goods  pledged  or  covered  by  lien 450  and  note. 

equity  to  marshal  assets  is  one  against,  not  against  judg- 
ment  461  n.,  469  n 

will  not  be  set  aside  on  claim  for  marshalling  assets..461  n.,  469  n. 

of  certificate  of  incorporation,  requisites  to  validity  of. 208 

of  contracts,  mode  of. 237 

or  instruments  under  seal 234,  235,  237  n. 

of  deeds,  belongs  to  president 195 

EXECUTIVE 

incorporation  by  letters  patent  from 56,  o9 

EXECUTIVE  OFFICERS 

who  are,  in  building  association  and  other  corporations....  208 
cannot  sanction  payment  of  dues  and  fines  in  anything  but 
cash  so  as  to  relieve  treasurer's  sureties  of  liability 217n. 

EXECUTOR  OR  ADMINISTRATOR 

of  deceased  member  not  ipso  facto  a  member 78 

powers  and  duties  of. •. 73 

whether,  may  become  member 73 

liability  of,  to  fines  and  forfeitures 74 

when,  may  give  building  association 

mortgage 31 8  T* 

of  husband  of  feme  covert  member,  rights  of,  to  stock 144 

of  deceased  borrower  may  compel  application  of  stock  to 
debt 459 

EXECUTORY  CONTRACTS  ULTRA  VIRES 286 

EXEMPTION 

power  of  legislature  to  enact,  from  taxation 438 

of  building  association  mortgages  from  taxation 439 

EX  PARTE 

fines  to  be  allowed  on,  foreclosure  of  mortgage 404 

injunction  against  officers  and  appointment  of  receiver.....  483 


INDEX.  58S 

EXPEDIENCY 

of  granting  right  of  withdrawal 127 

of  voluntary  repayment 158 

EXPENSES 

liability  for,  incurred  before  incorporation,  where 50,  110 

see  PRELIMINARY  EXPENSES. 

and  losses,  members  must  contribute  to 104 

borrower  bound  by  his  mortgage  to  contribute 

to 106,  107,  152,  180,  346 

upon  what  implied  condition 496n. 

termination   of   member's   duty   to   contribute 

to ....108,109 

before  withdrawal  are  a  set  off  against  withdraw- 
ing member's  claim,  when 105 

but  not  after  withdrawal 105  n.,  264 

burden  of  proving,  is  on  society 26471, 

see  CONTRIBUTION. 

all  interested  in  keeping  down 226 

EXPIRATION  OF  CHARTER 

is  the  period  of  repayment  of  loans  and  squaring  accounts  153 

effect  of,  on  judgment  obtained  in  suit  pending  before 270 

upon  society's  corporate  existence 472,  473,  493-495 

by  original  limitation  may  be  shown  in  defense 509 

EXPOSITORY  AND  RETRO-ACTIVE  STATUTES 66 

EXTENT 

of  surety's  liability  strictly  measured  by  terms  of  bond 219 

of  powers  of  building  associations 232 

of  agents 245 

EXTRA  COMPENSATION 

directors  cannot  claim,  for  acts  in  line  of  their  duty 227 

when  officers  cannot  claim  on  enlargement  of  duties 224 

EXTRA  SERVICES 

directors  may  claim  compensation  for 227 

EXTRA-STATUTORY  TERMS  OF  WITHDRAWAL 169-172 

repudiating  member  when  entitled  to  benefit  of. 133 

may  become  binding  on  society 133 

F. 

FAILURE  OF  INTEREST  CLAUSE 

in  married  woman's  mortgage  good 816 

FAILURE  OF  CONSIDERATION 

when  usury  creates  so  as  to  entitle  terre-tenant  to  defend...  364  n 


584  INDEX. 

FEES 

entrance,  not  reclaimable  by  member 184  n.,  168 

purpose  of. 168 

of  solicitor 214»v 

of  surveyor 214  n. 

for  examining  title  not  usurious  if  deducted  from  loan 

214  n.,  368 
for  transfer  of  stock  on  books,  right  of  society  to  charge....  446 

FEIGNED  ISSUE 

upon  judgment  confessed,  burden  of  proof  on  defendant 
under  plea  of  payment 260 

FEME  COVERT:  see  MARRIED  WOMEN. 

FEME  SOLE 

status  of  husband  of. ; 72 

FILLING  OF  VACANCIES :  see  VACANCY. 

FINES 

definition  of. 379 

general  discussion  of. 401^118 

liability  of  members  to,  to  be  set  forth  in  articles,  &c 54  (4) 

must  be  charged  for  dereliction  in  membership  duties 414 

attention  to  official  duties  enforced  by 103,  220 

personal  services  enforced  by 103 

are  payable  in  cash  only S3  n.,  217,  451  n, 

officers  liable  to,  for  neglect 103,  220 

must    be   notorious,   certain,   reasonable,    and    fixed   by 

rules 407-410 

interest  cannot  be  charged  on,  in  arrear 417 

remission  of,  discretionary  with  society  or  directors 418 

society's  lien  on  stock  for  unpaid 450 

for  default,  liability  of  executor,  &c.,  of  deceased  member 

for 74 

necessity  and  legal  aspect  of. 93,  401^18 

liability  for,  not  suspended  by  suit.,.91,  178,  263,  418 

liability  of  member  for 92 

source  of  power  to  impose 92 

statutory  and   charter  authority  required  fur 

imposition  of. 96,  405,  407 

regulation  of,  belongs  to  by-laws 406 

power  to  impose,  involves  liability  to  submit  to  92 
are  in  the  nature  of  liquidated  damages..93,  403, 415 
not  penalties 94,  415 


INDEX.  685 

FINES— Continued. 

for  default,  not  within  rule  forbidding  enforcement  of  pen- 
alties     94 

when  recoverable  on  married  woman's  rnort- 

gage 95,  404 

an  essential  part  of  borrower's  undertaking 95, 

149,404 
allowed  on  ex  parte  foreclosure  of  mortgage..95,  404 

rules  to  be  observed  in  relation  to 96-98,  406—414 

cannot  exceed  statutory  limit 96 

must  be  notorious 410 

must  not  be  oppressive 97 

upon  fines  and  in  arithmetical  progression 410, 

411,  412 

must  be  reasonable 97,  410 

proper  measure  of. 97,  413 

methods  of  assessment  of. 409n. 

must  be  certain 98,  407 

must  be  established  by  rules 98 

ambiguity  in  rules  imposing,  how  construed 98 

standing  against  borrower  defeat  right  of  repay- 
ment   155 

member  defeat  right  of  with- 
drawal   155 

must  be  paid  before  security  vacated 180 

not  recoverable  from  strangers  borrowing... 313-316 
from   infants  or   married  wo- 
men  316-318 

must  be  paid  even  where  not  mentioned  in 

mortgage 37271. 

and  cannot  then  be  defalcated  from  debt 404 

as  incidents  to  loan 379 

upon  fines,  generally 410,  411 

in  Pennsylvania 383 

decisions  touching  legality  of,  collected...383  and  notet 
order  of  application  of  debtor's  payments,  as 

between  dues,  interest,  and 404 

on  payments  of  interest 415,  416 

dues  including  stock-payments  and  interest  can- 
not be  subdivided  so  as  to  charge  separate 416 

interest  cannot  be  charged  on,  in  arrean. 417 

liability  for,  ceases  on  dissolution 496 

in  unincorporated  building  associations 518 


586  INDEX. 

FIRST  KNOWN  BUILDING  ASSOCIATION,  ACCOUNT  OF,      5 

FIXED  OR  MINIMUM  PREMIUM 

illegality  of. 122,  275,  323,  894-397 

when  borrower  may  defalk  from  debt 122,  897 

FIXED  VALUE 

tee  PAID-UP  VALUE. 

FORCED  REPAYMENT 

terms  of. 175 

FORECLOSURE 

of  mortgage  in  equity,  preliminary  account  in 177,  428 

costa  in  sui{a  for 179 

continuance  of  default,  a  condition  precedent  to,  must  be 

averred 258 

fines  to  be  allowed  on,  exparte  and  otherwise 404 

basis  of  equity  jurisdiction  in 428 

process  of,  in  equity 428 

mortgagee  of  defunct  society  entitled  to  decree  of. 495 

difference  between,  in  equity,  and  statutory  scire  facias  on 

mortgage 495  n, 

FORFEITURE 

of  stock,  forfeiture  of  membership  is,  and  vice  versa... 102 

terms  of,  and    liability   to,  to  be  set    forth    in 

articles 54  (4),  101 

liability  to,  and  rules  concerning 99-102 

justification  of. 99 

legality  of  rule  for 99 

for  gross  impropriety  of  conduct 100 

causes  must  be  set  forth  in  rules 101 

does  not  take  place  until  declared 101   176 

by  borrower,  not  a  necessary  consequence  of  suit 

upon  default 176 

cannot  be   claimed   without  giving 

credit  for  stock  on  debt 459 

waiver  of,  society  or  directors  may  make.,77,  99-102,  418 

must  be  clearly  society's  act 80,  202 

can  be  made  only  by  majority  of  direct- 
ors   202 

ends  obligation  to  pay  dues,  &c 102 

liability  of  executor  of  deceased  member  to 74 

of  charter  for  illegal  acts 285,  325,  478-481 

grounds  of. 479-480 

can  be  asked  only  by  State  on  quo  warranto.-ASl,  508 


INDEX.  587 

FORFE ITURE—  Continued. 

of  charter  cannot  be  inquired  into  collaterally 63,  475  n., 

481, 504,  508,  512,  513 

discretion  of  court  as  to  decreeing 479 

acts  amounting  to,  do  not  avoid  contract  collat- 
erally  288,481,508 

FORM 

of  security  does  not  affect  rule  as  to  repayment 157 

of  contract  immaterial  if  usury  in  its  substance 347,  349, 

358  and  note. 

of  mortgage  must  conform  to  statute  and  by-laws 420 

FORMAL 

incidents  to  building  association  loan 370 

FORMALITIES 

prescribed  in  case  of  withdrawal  must  be  observed 132 

of  affixing  seal 235 

of  execution  of  instrument  or  contract  under  seal 236,  237  n. 

required  to  make  binding  contracts 237 

of  transfer  of  stock 445 

must  not  be  unreasonable 447 

FORMATION  OF  BUILDING  ASSOCIATIONS 50-67 

preliminary  expenses  in 50,  110 

see  INCORPORATION. 

FRACTIONS 

of  years  disregarded  in  estimating  rebate  on  premium  per 

unexpired  year,  on  repayment  of  loan 166 

of  dues  paid  disregarded  in  computing  period  of  member's 

arrearages 259 

FRANCHISE 

acquisition  of  corporate :  see  INCORPORATION. 

forfeiture  of. « 285,  325 

surrender  of,  by  voluntary  agreement 172  n  ,  474—476 

expiration  of,  by  charter  limitation  may  be  shown  in  de- 
fense    509 

FRAUD 

in  recital  of  mortgage  may  be  shown  to  remove  borrower's 

disability  to  deny  his  membership 81  n» 

relieves  member  from  undertakings  as  to  stock-payments...    84 
securing  advantages  not  common  to  all  members  is,  in 

directors 207 

of  directors  makes  them  personally  liable 209 

what  inattention  or  negligence  amounts  to,  in  directors 209 


588  LNDEX. 

FRAUD  -Continued. 

of  officers,  agents  and  co-directors,  when  directors  liable  for.  209 

participation  in,  what  is,  in  directors 210,  211 

in  declaring  dividends,  effect  of,  on  directors 211 

of  directors  whereby  society  ruined,  postpones  them  on 

distribution 211,487 

of  agent,  when  society  liable  for 252 

when  makes  him  liable  for  interest  on  money 

collected 253 

in  obtaining  charter  does  not  avoid  it  collaterally 504,  506 

does  not  absolve  members  from  obedi- 
ence to  rules 305 

ground  of  forfeiture  thereof. 480 

investment  ultra  vires  of  society's  funds  in  lands  is,  upon 

society 305 

not  necessarily  involved  in  usury 363 

unlawful  reservation  inserted  through,  renders  mortgage 

void 420 

of  officers,  when  ground  for  appointment  of  receiver 483 

in  misstating  amount  of  capital  subscribed  in  order  to  get 

charter,  no  ground  for  collateral  impeachment 506 

in  assumption  of  corporate  existence  may  be  shown 512 

see  DIVIDENDS  ;  NUL  TIEL  CORPORATION  ;  TORTS. 
statute  of:  see  STATUTE  OF  FRAUDS. 

FRAUDULENT  CONCEALMENT 

discharge  of  sureties  on  official  bond  by 217 

FREE  COMPETITION 

in  bidding  for  loans,  indispensable 122,  394-397 

FREEHOLD  LAND  SOCIETY 

distinction  between  building  association  and 305 

building  association  cannot  do  business  of  a 304,  305 

see  LAND  ASSOCIATION. 

FUNCTIONS 

of  corporate  meeting 188 

duties,  liabilities,  and,  of  officers 194-230 

of  president  and  vice-president .'. 195 

of  treasurer 196 

of  secretary 197 

of  directors 198-200 

of  trustees 214 

of  solicitor 214  n. 

of  surveyor 214  n. 


INDEX.  580 

FUNDS  OF  SOCIETY 

right  of  member  applying  for  loan  of,  to  bo  preferred  over 

outside  investments  of. 116-121 

want  of,  when  no  defense  against  withdrawing  member 109 

part  of,  must  be  kept  available  for  withdrawals 139 

statutory  limitation  upon  proportion   to  be  kept  there- 
for...  140-143 

treasurer  the  keeper  of  the 196 

liability  of  directors  to  account  for  waste  and  misapplica- 
tion of. 212 

see  CORPORATE  FUNDS. 

Q. 

GAINS 

see  PROFITS. 
GENERAL  AGENT 

secretary  usually  is,  of  society 197 

GENERAL  ISSUE 

plea  of,  admits  corporate  existence 261 

GENERAL  MEETING 

what  is 182 

what  business  to  be  transacted  at 182 

notice  of,  how  to  be  given,  and  to  whom 183 

as  to  what  presumed  in  members 183 

duty  of  members  to  attend  and  vote  at 186 

GENERAL  RIGHTS  OF  MEMBERS  AS  CORPORATORS....  113 

GENERAL  STATUTES 

incorporation  under,  by  patent 66 

by  decree  of  court 60 

by  voluntary  association 61 

court  incorporating  under,  may  define  purposes,  when 60 

necessity  of  compliance  with,  in  every  step  towards  incor- 
poration     63 

effect  of  departure  from,  in  incorporation 63 

powers  granted  in  charter  under,  in  excess  of,  are  void  and 

cause  of  forfeiture 64 

«eeAcTs;  CHARTER;  POWERS;  STATUTES;  ULTRA  VIRES. 

GENERAL  WORKINGS  OF  BUILDING  ASSOCIATIONS 

description  of. 8-11 

GEORGIA 

decisions  in,  relating  to  building  associations 38n. 

cases  in,  on  theory  of  loans  or  advancements^. 846 


690  INDEX. 

GEORGIA— Continued. 

recovery  of  usury  in 860,  361 

rule  for  repayment  or  redemption  in 384  n> 

GOOD  BEHAVIOR 

see  OFFICERS  ;  OFFICIAL  BONDS  ;  SURETIES. 

GOVERNMENT 

of  building  association,  general  discussion  of. 181-193 

should  be  set  forth  in  articles,  &C...54  (6) 
is  substantially  in  hands  of  officers.  193 

of  unincorporated  building  association 519 

see  OFFICERS  ;  CORPORATE  MEETING  ;  DIRECTORS. 
GRACE 

running  of  period  of,  for  payment  of  arrears  not  inter- 
rupted by  bringing  and  pendency  of  suit 178,  377,  418 

GRANT 

of  excessive  powers  in  charter  void  and  cause  of  forfeiture.    65 

GREENWICH  UNION  BUILDING  ASSOCIATION 

account  of. 5 

GROSS 

impropriety  of  conduct  cause  of  forfeiture  of  membership.  100 
errors  of  judgment,  if  honest,  create  no  liability  in  directors.  209 
inattention  and  negligence  renders  directors  liable 209 

GROUND-RENT 

covenant  for  payment  of,  properly  inserted  in  mortgage...  383 

423  n.,  432 

GUARANTOR 

may  defend  for  usury  in  principal's  contract 363 

of  mortgage  debt  bound  by  terms  of  the  deed 386 

of  borrower's  debt  may  compel  application  of  stock  to  it...  459 
see  SURETY. 

GUARANTY 

see  SURETY. 

H. 

HARDSHIP 

of  bargain  will  not  itself  excuse  performance 386 

HEIRS 

torms  of  repayment  of  loan  by 385 

HIGHEST  BIDDER 

entitled  to  loan 116, 122 

see  MINIMUM  PREMIUM. 


INDEX.  501 

"HIS"  CONSTRUED  "ITS" 

in  agent's  acknowledgment  of  corporation  deed. 249 

HISTORY  OF  BUILDING  ASSOCIATIONS 

early 4 

in  America 6 

HOLDER  OF  STOCK 

see  OWNER  OF  STOCK. 

HOMES 

:u:ijiiisition  of,  by  members  an  essential  aim  of  building 
association  scheme  (see  DESIGN) 118 

HOMESTEADS 

see  DESIGN  ;  HOMES. 
HOUSES 

acquisition  of  by  members  a  principal  aim  of  society 118 

see  DESIGN. 

when  society  may  erect 301 

building  of,  and  dealing  in,  by  society,  ultra  vires 304 

HUSBAND 

see  MARRIED  WOMEN. 

of  feme  sole  member,  status  of,  at  common  law 72 

what  is  sufficient  reduction  into  possession  of  wife's  stock 
by 72 

liabilities  of,  to  society,  may  be  secured  by  mortgage  of 
wife's  separate  estate 318 

joint  judgment  of  husband  and  wife 317 

HYPOTHECATION  OF  STOCK 

does  not  bar  member's  right  to  vote 113 

is  collateral  security  only,not  a  credit  on  debt 440 n, 

levy  on  stock  after 450 

member's  rights  after 113, 148,  450 

to  society  gives  it  absolute  right  to  apply  to  debt 459 

as  collateral  to  mortgage,  marshalling  of  assets  upon 460-469 

see  ATTACHING  CREDITOR  ;  LEVY  ;  MARSHALLING  OF  ASSETS. 

I. 
IDENTITY 

of  name,  when  an  objection  to  incorporation 51 

of  various  forms  of  mortgages  as  to  substance.. .153, 157, 421-422 

IGNORANCE  OF  DRAFTSMAN 

unlawful  provision  inserted  in  mortgage  through,  may  be 
corrected...  420 


INDEX. 

ILLEGAL 

acU  of  society  not  aided  by  custom  or  usage 188 

no  defense  to  enforcement  of  obligations 172, 

289,  803,  805,  809 

penalty  for,  on  quo  warranto 323,  825 

do  not  avoid  charter  collaterally 479,  508 

by-law,  obligations  depending  on,  cannot  be  enforced 507 

conduct  of  society  and  officers  no  defense  to  obligations....  172, 

289,  303,  305,  309 

grants  in  charter  void  and  cause  of  forfeiture 64 

powers,  discretion  of  court  on  quo  warranto  as  to  penalty 

for  assumption  of. 479 

votes,  effect  of  acceptance  of,  on  election 188 

ILLEGALITY 

of  retro-active  and  expository  statutes 66 

of  regulations  defeating  purpose  of  making  members  land- 
holders   118 

of  society's  acts  when  aground  of  defense  and  when  not...  172, 

288-292,  299  and  note,  303,  305,  309 

of  security  cannot  be  set  up  as  a  defense  by  borrower 311 

of  loan  cannot  be  set  up  as  a  defense  by  borrower 313 

of  some  by-laws  does  not  avoid  charter  collaterally 507 

ILLINOIS 

statutes  in,  relating  to  building  associations 20 

decisions  in,  relating  to  building  associations 20  n 

"IMMEMORIAL  USAGE" 

has  no  place  in  building  associations 271  n 

IMPEDIMENTS 

to  transfer  of  stock  unlawful 446 

IMPLICATION 

of  fraud  when  arising,  and  effects  of. 211 

none  arises  that  acts  done  in  line  of  duty  where  rendered 

at  special  request  of  person  benefited 227 

as  to  existence  of  agency,  where  arises 244 

repeal  of  statutes  by 34  note  (2),  35  note  (7) 

IMPLIED 

no  liability  is,  as  to  sureties  beyond  precise  terms  of  bond 

(see  INDEMNIFICATION) 219 

assumpsit,  none  arises  in  favor  of  officers  for  compensation  226 

powers  of  building  associations 232 

agents 243 

contracts,  liability  of  society  on 288 


INDEX.  593 

IMPLIED— Continued. 

ratification  of  agent's  acts 247 

breach  of,  warranty  of  authority,  officer  or  agent  contract- 
ing ultra  vires  liable  for 198,  284 

prohibition  upon  certain  acts,  effect  of. 287 

power  to  take  interest,  in  power  to  loan 322,  374. 

power  to  take  security  for  loans 38O 

covenant  in  mortgage  to  make  up  difference  between  pro- 
ceeds of  sale  and  whole  sum  due 429> 

assumpsit  to  same  effect 429> 

condition  in  stock-subscription 85,  441 

may  be  waived;  effect 442: 

unanimous  consent  to  dissolve,  when 476. 

fraud :  see  CONSTRUCTIVE  FRAUD. 

IMPRESSION 

seal  must  be  such  as  to  make  an 234 

IMPROPRIETY  OF  CONDUCT 

gross,  cause  of  forfeiture  of  membership 100. 

IMPROVEMENTS 

right  of  making,  how  far  involved  in  power  to  acquire 
lands 301 

where  purchaser  for  value  under  void  sale  may  recover  for..  434 

IMPRUDENT  CONTRACT 

right  of  corporation  to  make 109n. 

INATTENTION 

directors  liable  for  gross 209 

INCIDENTAL 

taking  of  security  L*,  to  power  to  make  loan 380 

contract  to  procure  insurance  is,  to  power  to  take  security..  383  n. 
officer  cannot  claim  extra  compensation  for  acts  which  are, 
•to  his  office 227 

INCIDENTS 

o  loan  or  advancement 358-386 

formal  to  building  association  loan 370 

INCORPORATION 

of  building  associations  in  the  various  States 18-38 

effect  of,  upon  liability  for  expenses  incurred  before 50,  227 

by  name  already  in  use  will  be  refused 51 

various  methods  of. 55-62 

by  executive 56,  59 

by  special  act  of  legislature 57,  58 

la 


694  INDEX. 

INCORPORATION— Continued. 

by  special  act,  by  existing  constitution  and  by-laws,  with- 
out setting  them  forth  in  act 58,  521 

by  decree  of  court 60 

by  voluntary  association 61 

under  general  statute,  necessity  of  compliance  with  same..    63 

terms  of,  binding  on  State  and  society 65 

is  a  contract  between  State  and  society 65 

consideration  for  grant  of,  and  reciprocal  duties  from 75 

compensation  for  services  before,  not  to  be  thrown  on 

society 227 

when  assumpsit  will  lie  for 227  n> 

averment  of,  in  suits  by  and  against  society 261 

pleas  to 261 

proof  of,  dispensed  with  by  plea  of  general  issue 261 

purposes  of,  when  court  may  specify 273 

irregularities  or  fraud  in,  ground  of  forfeiture  of  charter....  480 

collateral  inquiry  into  validity  of. 504-508,  512 

rule  as  to,  the  same  under  all  forms  of. 505 

see  CHARTER;  COLLATERAL  INQUIRY;  NUL  TIEL  CORPORA- 
TION. 
may  be  shown  from  face  of  charter  not  to  have  been  under 

building  association  acts 510 

what  defects  in,  will  bar  society  from  building  association 

powers 510 

of  unincorporated  society  does  not  validate  void  contracts 

made  before  incorporation..518,  520 
effect  of,  on  rights  acquired  by 

society  before 520 

see  PARTIES. 
INCREASE  OF  CAPITAL  STOCK 

when  lawful  and  when  void 443 

not  ordinarily  within  powers  of  directors 200 

how  accomplished 200 

INCUMBRANCE 
see  ENCUMBRANCE. 

INDEBTEDNESS  OF  BORROWER  TO  SOCIETY 

fines  an  essential  part  of  (see  FINES) 95 

reduced  by  what  credits  (see  BORROWER) 105 

elements  of  contract  of  (see  ELEMENTS) 149-150 

includes    profit    and    loss    account    (see    CONTRIBUTION; 

LOSSES) 152,346 

does  not  contemplate  return  of  money  before  dissolution...  153 


INDEX.  595 

INDEBTEDNESS  OF  BORROWER  TO  SOCIETY— Continued. 
stock  may  be  appropriated  in  liquidation  of  (see  APPLICA- 
TION)..."  175,176 

lien  of  society  on  stock  for 450 

proof  of  dissolution  must  be  clear  to  evade 499 

effect  of  dissolution  upon 496-503 

INDEMNIFICATION 

members  do  not  owe  to  directors  personally  liable  for  con- 
tracts ultra  vires 307 

bond  for,  against  liens  does  not  bind  sureties  for  losses  after 

mortgage  has  merged 219n. 

INDEX 

error  in  entering  mortgage  on,  does  not  invalidate  mort- 
gage   433 

INDICTMENT 

formal  parts  of,  in  criminal  prosecution  of  officer 222 

INDIANA 

statutes  in,  relating  to  building  associations 21 

decisions  in,  as  to  building  associations 21  n, 

cases  in,  on  theory  of  loans  or  advancements 352 

INDIVIDUAL 

members  presumed  to  assent  to  lawful  acts  of  majority 181 

see  ASSENT. 

not  presumed  to  assent  to  acts  ultra  vires 181  n. 

see  DISSENTING  MEMBERS. 

may  sue  delinquent  directors  for  society 213 

see  ACTIONS  ;  DIRECTORS. 

cannot  be  sued  for  corporate  undertaking 505 

directors,  when  only  can  be  sued  by  officers  for  salaries 230 

liability :  see  PERSONAL  LIABILITY. 
INDIVIDUALITY 

of  members  not  recognized  by  the  law Ill 

INELIGIBILITY 

of  officer  de  facto  does  not  prevent  his  acts  from  binding 

society 192 

INFANCY 

in  some  States  no  bar  to  membership  (see  INFANT) 69 

INFANT 

powers  of,  as  member 70 

mortgage  of,  in  Maryland 7Qn» 

may  be  agent 242 

loans  to...  ..  816 


596 

INFERENCE 

of  law  as  to  fraud 211 

see  PRESUMPTION. 
INITIALS 

used  in  proof  of  service  endorsed  on  writ 257 

INJUNCTION 

against  officers  acting  unlawfully 114, 121,  200 

right  of  individual  mem- 
bers to  obtain 213 

attempting  to  make  improper  investments..  121 

and  appointment  of  receiver,  ex  parte 483 

and  appointment  of  receiver  must  be  asked 

for  by  member  as  such 491 

and  appointment  of  receiver,  when  borrower 

cannot  ask  for... 491 

directors  seeking  to  change  character  and  purpose 

of  society 200 

employe  suing  for  salary  when  granted 225  n. 

holder  of  society's  bond  and  mortgage  ultra  vires...  302 
defense  to  society's  mortgage  on  ground  of  dissolu- 
tion   495 

collection  of  taxes,  will  not  lie 438 

majority  seeking  to  dissolve  society,  at  instance  of 

minority 173 

improperly  granted  against  collection  of  mortgage  should 

not  be  dissolved  until  indebtedness  ascertained 177  n. 

INNOCENT  PARTIES 

as  between,  which  liable  for  damages  sustained 252 

IN  PARI  DELICTO 

society  and  its  borrowing  member,  when  held  to  be,  as  to 
usury 361 

INQUIRY 

when  purchaser  need  not  push,  beyond  recitals  in  mortgage  365  n. 
into  validity  of  charter,  corporate  existence,  etc. :  see  COL- 
LATERAL   INQUIRY;    CHARTER;    CORPORATE    EXISTENCE; 
NUL  TIEL  CORPORATION. 

INSOLVENCY  OF  BUILDING  ASSOCIATION 

what  is 488 

cannot  occur  from  indebtedness  ultra  vires 489 

does  not  dissolve  society 473 

is  no  ground  for  dissolution.... 484,  485 

proper  method  of  winding  up  society  upon 485-487 

order  of  priority  of  payment  on  distribution  upon 486 


INDEX.  597 

INSOLVENCY  LAWS 

insolvent  building  association  cannot  be  wound  up  under..  485 
INSPECTION 

by  auditors  of  mortgages  and  other  securities,  articles 
should  provide  for  periodical 54(7) 

INSPECTORS  AND  JUDGES  OF  ELECTION 

may  be  candidates 191 

discretion  of  former,  as  to  keeping  polls  open 191 

INSTALLMENTS 

what  meant  by , 12 

amount  and  details  as  to  payment  of,  to  be  set  forth  in 

articles 54  (4) 

are  payable  in  cash  only 93  n.,  217  n. 

see  DUES  ;  STOCK-PAYMENTS. 

INSTRUMENTS  UNDER  SEAL 

formalities  of  execution  of. 234,  235,  236,  237  n. 

what  contracts  must  be  by 235,  237 

INSUFFICIENCY 

of  proceeds  of  sale  to  cover  whole  sum  due  on  mortgage, 

remedy  in  case  of. 429 

INSURANCE 

contract  of  society  to  effect,  on  mortgaged  premises,  is 

lawful 247  and  note,  383n. 

measure  of  damages  for  breach  of. 383  n. 

covenants  for  payment  of,  properly  inserted  in  mortgage...  383, 

423,432 
INSURANCE  COMPANY 

when  bound  by  contract  ot  agent 243 

INTENTION  OF  LEGISLATURE 

in  authorizing  formation  of  building  associations :  see  DE- 
SIGN. 

by-laws  and  amendments  must  conform  with 57 

is  the  test  of  the  legality  of  building  association  loans 337 

INTEREST 

excessive  rate  of,  in  Starr-Bowkett  societies 45 

details  as  to  payment  of,  to  be  set  forth  in  articles 54  (5) 

an  incident  to  loans 149,  153,  322,  374 

society  cannot  demand,  after  repayment  of  loan 149  n., 

373,  875,  376,  427 

paid,  borrower  to  be  credited  with  on  account 156 

bringing  of  suit  not  a  refusal  to  accept 178 

runs  during  pendency  of  suit 178,  268,  877 


598  INDEX. 

INTEREST—  Continued. 

atops  upon  tender 178,  263,  377,  437 

upon  return  of  loan 149  n.,  373,  875,  376,  427 

starts  upon  agreement  to  accept  tender 178,  437 

agent  when  chargeable  with,  on  moneys  collected 253 

clause  for  judgment  on  default  of,  scire  facias,  etc.,  in  mar- 
ried woman's  mortgage  good 816 

right  of  reservation  of,  implied  in  right  to  loan,  hence  not 

ultra  vires 322 

does   not  diminish    by  reason   of   borrower's   stock-pay- 
ments  329,  374 

method  of  payment  of,  in  building  association  loan 329 

under  name  of  "dues,"  "redemption  money  " 333 

usuriously  paid,  when  recoverable 359-361 

rebate  of,  on  computation  of  amount  presently  due  on 

mortgage 375 

on  repayment,  where  dues  include,  or  redemp- 
tion money 427 

is  a  compensation  for  money  forborne 376 

premium  which  is  only  increased,  illegal 392-393 

upon  premium 398 

an  anomaly 421 

fines  upon  default  in  payment  of. 415,  416 

cannot  be  charged  on  fines 417 

liability  to  pay,  ceases  on  dissolution 4% 

allowed  on  partial  payments 452 

in  stock,  extent  which  member  allowed  to  hold 113 

is  basis  of  member's  rights 147 

by-laws  contrary  to  society's 280 

INTERPRETATION 
see  CONSTRUCTION. 
by  courts  of  statutes  previously  passed  cannot  be  controlled 

by  legislature 66 

INVALIDATING 

of  deed  duly  executed,  what  plea  available  for  the  pur- 
pose of. 236 

INVESTING  AND  BORROWING  MEMBERS 

relation  of,  to  scheme  and  definition  of  building  association..    40 

INVESTMENT 

of  funds,  except  by  loan  to  members,  is  mere  shift 117 

of  surplus  funds 805» 

of  funds  in  real  estate 303-308 

society  may  take  notes  as  an 811 


INDEX.  59? 

INVESTMENT— Continued. 

of  funds  in  stocks  for  speculation 321 

risk  in 456,457 

INVESTORS 

who  are 13 

cannot  be  forced  to  withdraw 173 

advantages  to,  in  permanent  societies 46 

see  MEMBERS. 

IOWA 

statutes  relating  to  building  associations 22 

decisions  on  building  association  cases 22  n. 

cases  on  theory  of  loans  or  advancements 353 

IRREGULAR  MEETING 

of  directors,  acts  of,  when  binding  on  society 201 

of  society,  acts  of,  not  binding 185 

may  be  ratified 184 

IRREGULARITIES  IN  OBTAINING  CHARTER 

ground  for  interference  of  State,  to  forfeit  charter 63,  480 

cannot  be  inquired  into  collaterally 475  n.,  504,  506 

which  do  not  avoid  charter  collaterally 506 

members  cannot  petition  for  dissolution  on  ground  of. 481  n. 

see  NUL  TIEL  CORPORATION. 

ISSUE 

see  GENERAL  ISSUE  ;  PLEADING. 

ISSUE  OF  SHARES 

conditions  of,  to  be  set  forth  in  articles 54  (3) 

in  serial  societies... 47,  48 

J. 
JOINT 

and  several  liability  of  managers  of  inchoate  society  for 

preliminary  expenses 50 

execution  of  authority  by  agents,  when  necessary 251 

judgment  of  husband  and  wife 318 

liability  of  principal  and  agent  for  agent's  torts 252 

mortgage  of  husband  and  wife 318 

obligor  may  compel  application  of  borrower's  stock  to 

debt 459 

security  of  husband  and  wife  for  husband's  debt 318 

member  and  stranger  for  member's  debt 382 

JUDGES  AND  INSPECTORS  OF  ELECTION 

may  be  candidates 191 


600  INDEX. 

JUDGMENT 

against  society  by  withdrawing  member,  what  averments 

will  stay  execution  of. 137,  138, 143 

withdrawing  member  may  proceed  to,  against  society 137, 

141-143,  264 

for  want  of  affidavit  of  defense,  where  not  to  be  taken 258, 

264,  265  n. 
obtained  in  suit  pending  before  expiration  of  society,  when 

void  thereafter 270,  495 

joint,  of  husband  and  wife 317 

equity  of  marshalling  assets    is   against  execution,  not 

against 461  n.,  469n. 

usury  merged  in,  cannot  be  recovered 366 

see  EXECUTION. 

directors  not  liable  for  gross,  but  honest,  errors  of. 204,  209 

JUDGMENT  CREDITOR 

has  only  diligence  to  commend  him 467 

standing  of,  as  to  marshalling  of  assets 467 

equities  of,  inferior  to  those  of  mortgagee  or  purchaser 467 

is  not  "  purchaser  "  or  "  mortgagee  " 467  n. 

JUDICIAL  SALE 

see  PROCEEDS  ;  PROCESS  ;  SHERIFF'S  SALE. 

of  mortgaged  premises  on  death  of  borrower,  effect  of. 174 

JUDICIARY 
ate  COURT. 

JUNIOR  ENCUMBRANCER 

see  PURCHASE  ;  PURCHASER  ;  MARSHALLING  OF  ASSETS. 

rights  of,  upon  sale  under  prior  mortgage 460n. 

JURY 

may  strike  out  items  for  useless  work  in  action  by  solicitor 

for  fees '. 214n. 

when  the  judge  of  the  legality  of  by-laws 274 

to  judge  whether  premium  usurious 338,  344,  346 

JUSTIFICATION 

see  FINES  ;  FORFEITURE  ;  PREMIUM  ;  WITHDRAWAL. 

K. 

KANSAS 

statutes  in,  relating  to  building  associations 23 

decisions  in,  touching  building  association  law 23  n. 

cases  in,  on  theory  of  loans  or  advancements 340 


INDEX.  601 

KENTUCKY 

decisions  in,  relating  to  building  associations,  collected 38  n. 

cases  in,  on  theory  of  loans  or  advancements 850 

building  association  suing  in,  must  give  bond  for  costs 256  n. 

KINDS 

various,  of  building  associations 41-47 


L. 

LACHES 

compromise  or  settlement  cannot  be  opened  for  usury 
where  applicant  was  guilty  of. 360 

LAND 

see  REAL  ESTATE. 

LAND  ASSOCIATION 

building  association  cannot  be  changed  into 200 

distinction  between,  and  building  association 200  n.,  305 

change  of  building  association  into,  does  not  destroy  cor- 
porate existence 200n. 

building  association  cannot  do  business  of. 304,  305 

conversion  of  society  into,  does  not  abrogate  member's 

obligations 289,  303,  305,  309 

see  FREEHOLD  LAND  SOCIETY. 

LAND  SOCIETY 

see  LAND  ASSOCIATION. 

LAPSE  OF  CHARTER 

by  original  limitation,  when  occurs 472,  473,  490,  493-495 

effect  of,  on  society's  corporate  existence  (see  DISSOLUTION)  490 

by  charter  limitation  may  be  shown  in  defense 509 

collateral  inquiry  into :  see  COLLATERAL  ;  FORFEITURE  ;  NOL 
TIEL  CORPORATION. 

LARCENY  OF  CHECK 

by  secretary,  what  is 221 

LATITUDE 

in  framing  rules  under  incorporation  by  patent  or  special 
act 59 

LAW 

of  building  associations,  basis  of  general  treatise  on 2 

difficulties  in  harmonizing.. 3 

courts  of,  apply  same  rules  of  computation  of  present 
value  of  mortgages,  as  chancery.. 428 


602  INDEX. 

LEASE 

void  for  want  of  seal 235 

assignment  of,  need  not  be  under  seal 285 

LEASEHOLD  PROPERTY 
see  RENEWAL. 
mortgage  on,  to  society,  valid  security 419,  425  n 

LEGAL  REMEDIES 

by-laws  prohibiting  members  from  pursuing,  generally  void  281 

LEGALITY 

of  charter  cannot  be  inquired  into  collaterally 63,  475  n, 

504-508,  513  ' 

nor  of  election  of  officers 192 

nor  of  officers'  acts 192 

criterion  of,  of  acts  of  society 283 

LEGISLATURE 

intention  of,  incorporating  by  special  act  must  be  observed 

in  ordaining  and  amending  constitution,  by-laws,  &c 57 

incorporation  by  special  act  of. 57-59 

incorporation  by,  by  existing  constitution  and  by-laws. ..58,  521 

power  of,  to  modify  charters  by  subsequent  enactment 65 

cannot    control    courts  in  interpreting  laws    previously 

passed 66 

may  change  remedies  at  any  time 67 

will  of,  how  expressed  as  to  creation  of  corporation. 273 

may  remit  taxes  on  building  association  mortgages 438 

see  COUNTY. 

cannot  impair  obligation  of  contracts 477 

when,  may  dissolve  building  associations 477 

defining  of  purposes  of  incorporation  belongs  to,  not  to 

society 480 

LENDER 

may  follow  money  into  lands,  when 307 

holding  collaterals  for  debt  not  enforceable  because  ultra 

vires  not  compellable  to  surrender  unless  paid 807  n. 

LENDING  MONEY 

misuse  of  power  of,  by  society 310-321 

LETTERS  PATENT 

incorporation  by 56,  59 

LEVY 

see  ATTACHING  CREDITOR  ;  HYPOTHECATION. 

upon  stock  held  by  society  as  collateral  security 450 


INDEX.  603 

LIABILITY 

tee  PERSONAL  LIABILTY. 

for  preliminary  expenses 50 

of  members  and  borrowers  to  fines,  etc.,  to  be  set  forth  in 

articles.. 54  (4) 

not  suspended  by  bringing  and  pendency  of 

suit 178,  377,418 

of  depositors 77 

to  contribution  cannot  be  evaded  by  transfer  or  with- 
drawal  104, 105 

personal,  of  members,  for  debts  of  society 110,  111,  505  n. 

of  society  to  account  for  profits  arises,  when 128,  150,  153, 

329,  336,  452,  456,  457 

of  defaulting  borrower 175,  456— 457 

duties,  functions,  and,  of  officers 194-230 

for  not  keeping  proper  minutes 205 

of  directors  as  bailees  or  mandataries 209 

for  losses,  &c 209-210 

to  account  for  waste  or  misapplication  of  funds..  212 
to  suit  by  individual  members  (see  ACTIONS; 

DIRECTORS) 213 

in  approving  official  bonds 216 

of  solicitor 214n, 

of  surveyor 214  n, 

of  sureties  strictly  confined  to  terms  of  bond 219 

of  officers  to  fines  and  amotion 220 

see  CRIMINAL  LIABILITY. 

or  agents  by  reason  of  contracts  ultra  vires 284 

of  borrowers,  how  affected  by  premature  dissolution. ...496-503 

for  losses  and  expenses...!06, 107, 152, 180, 346,  496  n 
of  defendant  on  contract  whereof  he  led  plaintiff  to  a  cer- 
tain erroneous  understanding 230 

of  society,  for  services  and  expenses  before  incorporation..50,  110 
to  suit  by  salaried  officer  improperly  removed...  229 

upon  implied  contracts 238 

for  torts  and  misrepresentation  of  agents 257 

to  suits  and  actions  generally  (see  ACTIONS).. .254-270 
to  State  for  departure  from  powers  gran  ted... 325,  473 
LIEN 

on  member's  stock  in  favor  of  society 87,  450 

is  statutory  only 87,  450 

prevents  transfer  and  withdrawal 450 

of  mortgage  though  vacated,  members  still  bound  on  cove- 
nants for  dues,  &c 90 


604  INDEX. 

LIEN— Continued. 

of  mortgage  divested  by  sheriff's  sale  under  it 429 

on  corporate  property,  equitable,  follows  same  in  hands  of 

members Ill 

for  purchase  money,  equitable 302,  307  n 

follows  into  hands  of  third  parties 307 

levy  on  stock  covered  by  society's  (see  ATTACHING  CRED- 
ITOR)   450 

see  MARSHALLING  OF  ASSETS. 

LIMITS 

statutory,  effect  of,  upon  funds  available  for  withdrawals...  140 

design  of  same 143 

and  charter,  of  powers  of  society 232 

upon    reservations   in    loans  must    be   strictly 

observed 356 

upon   duration   of  society  is    part   of   charter 

though  omitted 472 

of  powers  of  directors  (see  DIRECTORS) 200 

of  agents  (see  AGENTS) 245 

of  society  (see  POWERS;  ULTRA  VIRES) 232 

of  amount  of  loan  or  advancement  receivable  by  member..  391 
of  personal  liability  of  members  for  corporate  debts  (see  Per- 
SONAL  LIABILITY) 110 

LIQUIDATED  DAMAGES 

fines  are 93,  403,  415 

"LOAN" 

what  is 13 

LOAN  OR  ADVANCEMENT  TO  MEMBERS 

terms  used  as  synonymous 115  n.,  326  n, 

matter  of,  to  be  regulated  in  articles 54  (5) 

what  is  and  what  not  a  true  building  association 330,  492 

right  to  receive,  nature  of  member's 43,  115,  444 

highest  bidder  has  absolute 116 

provided  he  can  furnish  proper  security...  43,  • 

116,  123 

elements  of  contract  of. 147, 149-150,  326,  421 

which  make  it  something  more  than  mere 

loan 335,  336,  337,  357 

equally  a  partnership  dealing  and  lending  of  money 357 

what  included  in 369,  384 

nature  of  transaction  of. 371 

incidents  to  (see  MINIMUM  PREMIUM) 858-386 


INDEX.  605 

LOAN  OR  ADVANCEMENT  TO  MEMBERS—  Continued. 

analysis  and  theory  of  contract  of. 326-857 

cases  on,  in  Connecticut 353 

District  of  Columbia 343  n. 

England 338 

Georgia 346 

Indiana 352 

Iowa 353 

Kansas 340 

Kentucky 350 

Maryland 339 

Massachusetts 341 

Nebraska 348 

New  Hampshire 344 

New  Jersey 342 

New  York 345 

North  Carolina 347 

Ohio 353 

Pennsylvania 351 

South  Carolina 3477k 

Tennessee 349 

Virginia 343 

practical  results  of. 387 

in  terminating  societies 41 

in  permanent  societies 46, 180 

method  of  obtaining 42 

who  entitled  to,  as  member... 43 

amount  member  is  entitled  to  by  way  of. 43, 126 

impossibility  of  enforcing  terms  of,  does  not  affect  bor- 
rower's rights  of  membership 76 

person  may  become  member  merely  to  obtain 76 

recovery  of  whole,  out  of  lands  mortgaged,  and  subsequent 

receipt  of  dues  estop  society  from  denying  membership..    79 
after  repayment  of,  borrower  liable  on  his  obligation  for 

dues,  &c 88,  432 

fines  part  of  contract  of. 95,  404 

for  what  borrower  may  claim  credit  on 107 

society  need  not  inquire  into  application  of. 116, 125 

member  applying  for,  to  be  preferred  over  outside  invest- 
ments  11&-121 

fixed  or  minimum  premium  no  lawful  part  of. 122 

applicant  cannot  maintain  assumpsit  for  promised 124,  267 

may  have  action  for  breach  of  contract 124 

impossibility  of  supervising  application  of. 125 


606  INDEX. 

LOAN  OR  ADVANCEMENT  TO  MEMBERS-  Continued. 
term  of,  intended  to  be  for  society's  duration,  even  if  other- 
wise written 150  n.,  153,  332 

repayment  of,  not  contemplated  before  society's  expira- 
tion  153,  371,  430,  492 

forms  of  securities  for,  as  to  amount  and  time  of  repay- 
ment  153, 157 

identity  of 354 

construction  of,  not  to  be  a  loan 160 

as  "amount  actually  received" 167, 

168,  384,  385 

as  anticipatory  payment  of  shares 338 

existing  provisions  in  rules  as  to  repayment  are  part  of 

contract  of. 169,278 

repayment  of,  in  permanent  societies 180 

contract  of,  cannot  be  added  to  by  by-law 278 

abuse  of  power  to  make,  when  no  defense  to  enforce- 
ment of. 288 

security  for  (see  SECURITY) 311 

customary 380 

statutory  provisions  as  to,  refer  only  to  members 314 

misuse  of  power  in  making,  what  is,  and  effects  of. 310-321 

power  to  make,  involves  right  to  take  interest 322 

repayment  of,  proceeds  upon  basis  of  principal  and  in- 
terest  326,  327,  331,  334 

interest  on,  does  not  diminish  by  stock  payments 329 

ceases  on  repayment  of. 427 

uncertainty  of  borrower's  obligations  by  reason  of. 336 

contract  of,  must  be  analysed  by  courts  to  discover  usury 

(see  USURY) 347,  353  n.,  358  n. 

reservations  upon,  strictly  confined  to  statutory  limits. ..356,  369 

as  legalized  in  the  several  States 383 

extent  and  validity  of  contract  of. 357,  359 

rule  for  repayment  of,  in  Georgia 384n 

terms  of,  validly  made  bind  all  parties  in  interest 386 

cannot  be  evaded  on  plea  of  illegal  acts  of  society  or 

officers,  or  hardship 386 

transaction  of,  with  reference  to  premium 389-390 

limit  of  amount  of 391 

repayment  of,  right  of  voluntary 152 

rule  for 154-174 

upon  default 175,  456,  457 

upon  dissolution  or  what  amounts  thereto..496-503 
see  REPAYMENT. 


INDEX.  607 

LOAN  OR  ADVANCEMENT  TO  MEMBERS- Continued. 
borrower's  and  society's  right  to  apply  stock-payments  to 

discharge  of. 453-459 

see  APPLICATION  OF  STOCK. 

taking  of,  when  estops  borrower  from  denying  corporate  ex- 
istence 513, 516 
his  member- 
ship     81 

nee  ESTOPPEL. 

by  unincorporated  building  associations 341,  344, 

345,  351,  355,  356,  518 

see  BORROWER  ;  BORROWING  MEMBER  ;  MORTGAGES  ;  REPAY- 
MENT; USURY. 
LOANS  BY  SOCIETY 

to  strangers  and  persons  not  sui  juris 313-318 

see  CORPORATIONS  ;  INFANTS  ;  MARRIED  WOMEN  ;  STRANGERS. 

"LOANS  ADVANCED" 

construction  of. 385 

LOANS 

whether  society  may  contract  and  become  liable  on 293-302 

see  BORROWING  POWERS. 

LOCALITY 

name  merely  descriptive  of,  does  not  become  exclusive 
property  by  user 51 

LOSSES 

see  EXPENSES. 

members  must  contribute  to 104 

before  withdrawal,  are  set  off  against  amount  due  on. ..105, 137 
sure  to  arise,  but  unascertained  are  available  as  such  set  off  105 

termination  of  duty  to  contribute  to 108, 109 

averment  of,  by  society,  when,  will  stay  execution  of  judg- 
ment by  withdrawing  member 137 

are  part  of  borrower's  indebtedness 152,  346 

withdrawing  member  not  affected  by,  accruing  after  with- 
drawal   264 

burden  of  proving,  as  set  off,  is  on  society 264n 

upon  premature  dissolution,  extent  of  borrower's  liability 

for 496n, 

chargeable  on  assets 496,  501 

probability  of,  when  ground  for  appointment  of  receiver...  483 
directors'  liability  for,  in  consequence  of  approval  of  bad 
official  bonds...,  ..  216 


608  INDEX. 

LOSSES— Continued. 

sureties'  liability  for,  arising  from  receipt  by  treasurer  of 
anything  but  cash  for  dues  and  fines 21« 

M. 
MAJORITY 

of  corporators,  lawful  acts  of,  bind  whole  corporation  (see 

ASSENT) 181,  278,  410 

binds    all    members    only  by    its    lawful 

acts 278,  410 

what  is,  at  corporate  meeting 186 

effect  of  protest  of,  against  election 189 

of  refusal  of,  to  vote  at  election 189 

when,  cannot  compel  minority  to  agree  to 

dissolution 474 

of  directors  what  constitutes,  of  quorum 202 

when,  of  quorum  incapable  of  acting 203 

when,  of  whole  number  required 203 

society  bound  only  by  acts  of. 206 

MALA  QRAMMATICA  NON  VITIAT  LEGEM. 249 

MANAGEMENT 

expenses  and  losses  of,  duty  of  members  to  contribute  to...  104 
duty  of  borrowing  members  to  con- 
tribute to 346 

see  CONTRIBUTION  ;  EXPENSES  ;  LOSSES. 

of  society  left  to  directors  and  officers 188,  193 

of  unincorporated  building  association.. 519 

see  GOVERNMENT. 
MANAGERS 

of  inchoate  society  personally  liable  for  preliminary  ex- 
penses  50,  110 

secretaries  in  building    associations    usually  are,  of   ita 

business 197 

MANDAMUS 

when  lies  to  compel  transfer  of  stock  on  books 448 

MANDATARIES 

directors  are  mere 209 

MANNER 

of  approving  official  bonds 216 

of  executing  contracts 237 

MARGIN 

on  building  association  mortgages 887 


INDEX.  609 

MARKET  VALUE  OF  STOCK 

when  measure  of  damages  for  refusal  to  transfer. 268  n. 

MARRIED  WOMEN 

assignment  of  mortgage  on  husband's  land  to 318n. 

estoppel  upon,  by  recitals  in  mortgage  of. 71 

joint  judgment  of  husband  and 318 

loans  to 316-318 

membership  of,  in  society,  legalized  in  some  countries 69 

powers  incident  to 70 

mortgage  of,  when  secures  fines 95,  404 

for  husband's  liabilities  to  society 312,  382,  404 

may  contain  clause  for  judgment  on  default, 

sci.  fa.,  &c 316 

next  of  kin  of,  after  death,  cannot  impeach  mortgage  of,  for 

usury 317 

powers  of,  as  members 70 

property  of,  mortgaged  for  husband's  debt  not  liable  to  be 

first  taken  at  instance  of  second  mortgagee  of  husband's..  468  n. 
separate  estate  of,  may  be  mortgaged  for  liability  of  hus- 
band to  society 318 

stock  of,  acquired  dum  sola,  husband's  right  to 444 

MARSHALLING  OF  ASSETS 460-469 

general  doctrine  of 461 

equity  of,  is  against  execution  not  against  judgment. ..461  n.,  469  n. 
court  will  not  entertain,  on  motion  to  set  aside 

execution 461  n.,  469  n. 

in  creditor  is  absolute  against  debtor 461,  465 

where  not  applicable 466,  468  and  note. 

standing  of  judgment  creditor  as  to 467 

effect  of  rights  of  third  parties  upon 468  and  note. 

does  not  follow  property  into  hands  of  innocent 

purchaser  for  value 468 

where  wife's  property  is  mortgaged  for  husband's 

debts 46871. 

no  lien  creditor  can  invoke,  as  to  securities  not 

liens  when  his  own  became  so...'. 468  n 

notice  ~>f  subsistence  of,  must  be  actual 469 

doctrine  of,  as  to  stock  pledged  as  collateral  and  mortgage 

security 460-469 

does  not  interfere  with  rule  that  payments  011 

stock  are  not  ipso  facto  payments  to  debt 4&fv. 

MARYLAND 

statutes  relating  to  building  associations  in 2* 

decisions  concerning  such  societies  in,  collected 24  n. 

So 


610  INDEX. 

MARYLAND— Continued. 

cases  on  theory  of  loans  or  advancements  in 839 

recovery  of  usury  in 860 

MASSACHUSETTS 

statutes  in,  relating  to  building  associations 25 

decisions  concerning  such  societies  in,  collected 25  n 

cases  on  theory  of  loans  or  advancements  in 841 

MATURITY  OF  STOCK 

burden  of  proof  of,  when  on  borrower 260,  493  n. 

right  of  member  to  petition  for  winding  up  on 490,  491 

financial  condition  necessary  in  order  to 492 

difficulty  in  ascertaining  exact  period  of. 492 

see  PAID  UP  VALUE  ;  PAR  VALUE  ;  STOCK. 
MAXIMUM 

number  of  shares,  member   holding   more   than,   cannot 

defend  on  that  ground 288 

society  may  waive  its  own  by-law  as  to...  288 
society  cannot  permit  members  to  hold 

beyond,  as  fixed  by  statute 323 

duration  of  society  being  limited  under  general  law,  sup- 
plied in  charter  not  specifying 472 

MEASURE 

of  damages  in  action  against  society  for  refusal  to  transfer 

stock 268  n.,  449 

for  not  effecting  insurance  as  agreed 383  n. 

of  fines,  what  is  a  proper 413 

of  personal  liability  of  members  for  corporate  debts 110, 

(see  605  note) 

of  liability  of  sureties  on  official  bonds 219 

treasurer's  sureties  where  he  does  not  take 

cash  for  dues,  <fec 217  n. 

MEETINGS 

corporate,  annual,  time,  place,  calling,  <fcc.,  of,  to  be  fixed 

in  articles 54  (8) 

right  of  members  to  have  notice  of  (tee  NOTICE)    43 

attend 113 

general  (see  GENERAL  MEETING) 182, 183 

special  (see  SPECIAL  MEETING) 184, 185 

adjourned  (see  ADJOURNED  MEETING) 185 

duty  of  members  to  attend.. 186 

functions  of. 188 

tee  CORPORATE  MEETING. 
directors'  (see  DIRECTORS'  MEETING*) 201-206 


INDEX.  611 

MEETINGS—  Continued. 

directors',  minutes  to  be  kept  of. 205 

what  primary  evidence  of  acts  of. 206 

liability  for  non-attendance  of  director  at 210 

necessity  of  notice  of,  to  all  directors  (see  NOTICE)..  201 
MEMBERS 

see  MEMBERSHIP ;  BORROWERS;  WITHDRAWING  MEMBERS. 

acquisition  of  character  of,  mode  of. 68 

investing,  do  not  lose  membership  by  becoming  borrowers  68, 

146-148 

effect  of  hypothecation  of  stock  upon 113,  450 

status  of  husbands  of  femes  soles  members  at  common  law  as    72 

deceased  members'  executors,  &c.,  as 73 

building  associations  cannot  become  in  others 75,  319-321 

persons  may  become,  merely  to  obtain  loans 76 

in  arrears  cannot  withdraw 87 

all,  were  originally  intended  to  become  borrowers 40, 115 

original  contract  between,  and  society 127 

recognized  by  the  law  only  in  the  aggregate,  not  individu- 
ally   Ill 

every  member    entitled    to    one  vote,  whatever  his  in- 
terest  113, 187  n. 

unanimous  consent  of,  may  ratify  acts  of  directors,  ultra  vires 

as  between  them  and  society 169,232,284 

individually,  cannot  interfere  with  directors 199,  204 

when,  have  priority  over  directors  in  distribution  of  assets 

on  insolvency 211 

of  building  associations  are  not  partners 335 

ambiguous  rules  as  to  fines  construed  in  favor  of..98, 407-409, 411 
repayment  and  withdrawal,  ditto.,167, 168 

death  of  all,  or  of  integral  part,  works  dissolution 472 

not  the  officers  but  the,  constitute  the  society  as  a  corpora- 
tion   473 

duties  and  liabilities  of  (see  DUTIES  OP  MEMBERS) 83-111 

should  be  defined  in  articles 54  (4) 

assent  of,  presumed  to  all  lawful  acts  and  by-laws  of 

society 83, 181,  271 

when  not  presumed   (see  DISSENTING  MEM- 
BERS)  181  n.,  410 

bound  to  obey  rules 83 

in  spite  of  fraud  in  obtaining  charter 305 

of  illegal  acta  of  society  or  officers 289,  303,  305,  309 

of  illegal  change  in  character,  etc.,  of  society 200  n. 

but  not  those  made  after  withdrawal  notice 136  n. 


612  INDEX. 

MEMBERS—  Continued. 

duties  and  liabilities  of— continued, 

bound  to  pay  dues 84-91,  93 

notwithstanding  refusal  or  neglect  of  others 84 

not  after  dissolution 496 

liable  to  an  action  of  assumpsit  for 84.  451 

only  when  whole  stock  subscribed,  unless  waived..    85 

not  entitled  to  notice  when  payable 86,  451 

not  relieved  by  bringing  of  suit 91,  178,  377,  418 

liable  to  fines  for  default 92, 

to  forfeiture  for  continued  default 99 

on  obligation  after  repayment  of  debt  due..88, 164 

if  in  arrears,  cannot  withdraw 87 

stock  subject  to  lien  for 87 

bound  to  contribute  to  losses  and  expenses  (see  CON- 
TRIBUTION)  104,  346 

in  permanent  societies 180 

cannot  evade  by  transfer  or  withdrawal 104,  105 

suit  against,  for,  to  corporate  debts,  when  not  a 

lien  in  Missouri llOn. 

personal  claim  of  member  who  is  creditor  of  society 

may  be  set  off  against  liability 110 

extent  of  personal  liability  for  corporate  debts..HO-lll 

cannot  be  sued  for  corporate  liability 505». 

owe  society  personal  services 83,  103,  226 

bound  to  notice  time,  place  and  general  character  of 

business  at  general  meetings 183 

attend  and  vote  at  such 186 

contribute,  according  to  powers,  to  success 

•  of  the  enterprise 226 

rights  of  (see  RIGHTS  OF  MEMBERS) 112-180 

interest  in  society  is  basis  of. 147 

entitled  to  share  equally  in  profits  on  dissolution..  104 
advanced,  have  nothing  to  expect  but  cancella- 
tion of  securities 40 

may  hold  more  than  one  share  each 113 

but  have  only  one  vote  each.... 113, 187  n. 

access  to  corporate  books 114 

may  proceed  to  restrain  unlawful  acts  of  officers 

114  and  note,  305,  309 
against     them    for     protection    of 

society 119,213 

all  may  become  borrowers 115 


INDEX.  613 

MEMBERS— Continued. 

rights  of :  when  absolutely  entitled  to  receive  loan  or  ad- 
vance  115-123 

preference    over    outside    investments,    entitled 

to 116-121 

amount,  entitled  to  receive  by  way  of  loan  or 

advance 43,  126 

nature  of  right  to  receive  loans,  &c 43,  115,  444 

cannot  maintain  assumpsit  for  promised  loan 124, 

245  n.,  267 

but  may  sue  for  breach  of  contract 124,  267 

may  claim   account  of  profits   only   on   termin- 
ation  128,  129,  150 

may  withdraw  (see  WITHDRAWAL) 127-141 

not  with  fines  and  other  charges  standing 

in  arrears 155 

what  amount 130,  131 

when  with  share  of  profits 131  n. 

but  must  observe  rules  prescribed  as  to  with- 
drawals   132 

not  inconsistent  with 

statute. 132 

is  then  a  mere  creditor  of  society 136 

and  not  bound  by  rules  made  after  notice 

of  withdrawal 136  n, 

may  compel  settlement  of  affairs  in  equity  when 

stock  par , 145,  490-491 

but  cannot  qua  stockholders  sue  at  law  for 

value  of  paid-up  stock 144,  265 

must  either  wait,  or  withdraw  and  sue 144 

and  cannot  petition  for  winding-up  for  irreg- 
ularities in  incorporation 481  n 

may  insist  upon  carrying  on  society  to  its  legiti- 
mate close 173 

may  be  auctioneer  at  society's  sale,  and  sign  mem- 
orandum for  purchaser 242 

retain  control  overstock  pledged  and  may  vote.,113,  450 
if  creditors  of  society,  entitled  as  such  on  dis- 
tribution of  insolvent  society's  assets 486 

when  preferred  therein  over  directors 211,  487 

MEMBERSHIP 

in  building  association  akin  to  partnership 127 

acquisition  of,  personal  prerequisites  for,  to  be  set  forth  in 
articles 54  (4) 


614  INDEX. 

MEMBERSHIP—  Continued. 

acquisition  of,  mode  of. 68 

persons  capable  of. 69 

infants  and  married  women,  where  capable 

of 69,  70 

whether  at  common  \&vtfeme  sole's  husband 

makes 72 

deceased    member's    executor, 

<fec.,  makes 73 

one  society  incapable  of,  in  another..75,  319-321 
for  mere  purpose  of  obtaining  loan,  proper..    76 

evidence  of,  corporate  books  are  primary 78,  446 

payment  of  dues  after  suit  is,  which  society 

estopped  from  controverting 79,  176,  431 

what  such,  as  borrower  is  estopped  from  deny- 
ing (see  ESTOPPEL) 81 

duties  of  (see  DUTIES  OF  MEMBERS) 83-111 

borrower's   mortgage  (or  decree  thereon)    after 

repayment  stands  as  security  for 428,  432 

rights  of  (see  BIGHTS  OF  MEMBERS) 112-180 

termination  of,  modes  of 82 

in  serial  society 49 

by  forfeiture  of. 99-102 

does  not  occur  without  distinct 

enforcement  of. 101, 176 

by  withdrawal... * 136 

ceases    at    giving    of    with- 
drawal notice 108 ;». 

'                    right   to  withdraw   an   inci- 
dent to 430 

does  not  occur  by  taking  loan  or  advance- 
ment  147-148 

exception  to  this  rule 147,  476 

nor  by  borrower's  default,  and  suit,  when. .176,  431 
opportunity  given  in  equity  to  default- 
ing borrower  to  preserve 177 

see  PRELIMINARY  ACCOUNT. 
but  by  sale  on  mortgage  and  application  of 

proceeds  and  stock  payments  to  debt 431 

and  by  terms  of  borrower's  contract 476 

Of  borrower 147-148 

when  society  estopped  from  denying 79,  431 

when  borrower  estopped  from  denying 81 

of  depositors  is  quasi 77 


INDEX.  615 

MEMBERSHIP—  Continued. 

of  husband  of  feme  sole  member  at  common  law 72 

of  deceased  member's  executor  or  administrator 73 

MERGER 

of  mortgage  destroys  sureties'  liability  for  losses  subse- 
quent to 219n. 

in  ownership  of  land 429 

of  usury  in  judgment 366 

settlement 360 

of  borrowing  member's  shares  in  capital  stock 371 

of  stock  in  loan  does  not  occur  of  course  (see  APPLICATION)..  452 

METHODS 

of  obtaining  loans  or  advancements 42 

of  incorporation,  various 55-62 

same  rule  as  to  collateral  impeachment 

of  charter  under  all 505 

see  CHARTER  ;  COLLATERAL  INQUIRY  ;  NUL 

TIEL  CORPORATION. 
MICHIGAN 

statutes  in,  relating  to  building  associations.. 26 

MINES 

when  mortgagee  in  possession  may  open 432 

MINIMUM  OR  FIXED  PREMIUM 

illegal ., 122,  275,  323,  394-397 

when  borrower  may  defalk  from  indebtedness  to  society ..122,  397 

MINISTERIAL 

survival  of,  functions  between  agents 251 

treasurer's  duties  are... 196 

officers'  duties  in  calling  meetings  when  merely 184 

MINNESOTA 

statutes  in,  relating  to  building  associations 27 

MINOR 

see  INFANT. 
MINORITY 

see  INFANCY. 

may  insist  upon  carrying  on  society's  business  to  expira- 
tion of  charter 173,  474 

when,  may  elect  officers  of  society 189 

MINUTES 

secretary  to  keep,  of  corporate  and  directors'  meetings 197 

of  directors'  transactions .'. 205 


616  INDEX. 

MINUTES—  Continued. 

of  directors'  transactions,  keeping  of,  not  essential  to  valid- 
ity of  contracts,  when 205 

signing  of,  not  essential,  when 205 

statutory  or  charter  provision  for 

keeping,  when  directory 205 

directors'  or  secretary's  liability 

for  not  keeping,  properly 205 

primary  evidence  of  acts  and  con- 
tracts of  directors 205 

primary  evidence  of  elections,  meetings,  dividends,  &C..205,  206 

of  agent's  appointment 242 

if  existing,  should  be  produced 206 

MISAPPLICATION  OF  CORPORATE  FUNDS 

may  be  restrained  at  instance  of  individual  members..H4  and  note, 

305,  309 

directors'  liability  for  (see  DIRECTORS) 212,  482 

MISAPPROPRIATION 

of  funds  by  purchase  of  lands  may  be  restrained 289 

of  stock,  society's  liability  for 252 

MISBEHAVIOR 

member  not  excused  from  paying  dues  by  the,  of  others....    84 
nor  borrower  relieved  from  performance  of  his  conduct  by 

same 499 

of  directors,  in  certain  cases  gives  members  Tight  to  pro- 
ceed against,  but  only  for  the  protection  of 

the  society 213 

importance  of  allegation  of,  in  bill  for  such 

purpose 213 

willful,  affects  them  with  liability 209 

effect  of,  upon  them  on  distribution  of  society's 

assets  on  insolvency 211,  487 

may  be  objected  to  by  any  single  member 305 

see  ACTIONS;  CRIMINAL  LIABILITY  ;  DIRECTORS; 

OFFICERS;  PERSONAL  LIABILITY. 
when  a  ground  for  appointment  of  receiver..4S2,  483 
MISCONDUCT 

see  MISBEHAVIOR. 
MISDESCRIPTION  OF  PREMISES 

mortgagee  in  possession  cannot  claim  costs  for  sale  void 

for 482 

MISFEASANCE 
tee  MISBEHAVIOR. 


INDEX.  617 

MISLEADING  NAME 

improper  assumption  of,  by  corporation  restrained 51 

MISMANAGEMENT 

personal  liability  of  officers  for  (see  MISAPPLICATION;  MISAP- 
PROPRIATION; MISBEHAVIOR) 482 

when  a  ground  for  appointment  of  receiver 482,  483 

see  INJUNCTION  ;  RECEIVER. 

MISNOMER  OF  BUILDING  ASSOCIATION 

plaintiff  in  bill  in  equity  may  be  amended  at  bearing 257 

plea  of,  is  in  abatement 261  n 

MISREPRESENTATION 

relieves  member  against  undertakings  as  to  dues 84 

of  agent,  society's  liability  for  (see  AGENT;  TORTS) 252 

when  no  ground  of  action 252 

in  obtaining  charter,  ground  for  forfeiture  thereof. 480 

does  not  avoid  it  collaterally 504,  506 

as  to  fact  of  corporate  existence  may  be  shown 515? 

MISSOURI 

statutes  in,  relating  to  building  associations 28 

decisions  in,  relating  to  building  associations 2871. 

personal  liability  of  members  in,  for  corporate  debts... 28 n.,  llOn. 

MISSTATEMENT  OF  CAPITAL  STOCK 

before  incorporation  will  not  avoid  charter  collaterally 506 

MISTAKE 

in  recital  in  mortgage  does  not  estop  borrower  from  deny- 
ing his  membership 81 

of  judgment,  if  honest,  directors  not  liable  for 204,  209 

through  accident  or  ignorance  may  be  corrected  in  mort- 
gage   420 

mere,  not  a  ground  of  forfeiture  of  charter 479 

in  amendment  in  reciting  date  of  act  amended,  not  fatal. .21  (c)  n> 
see  ERRORS. 

MISUSE 

of  powers  generally 285-292,  325 

of  lending  money 310-321 

see  ULTRA  VIRES. 

MISUSER  OF  FRANCHISE 

does  not  ipso  facto  dissolve  society.. 473 

is  a  ground  of  forfeiture  of  charter  by  State 478 

what  is ....  479 


618  INDEX. 

MODES  OF  INCORPORATION 

same  rule  as  to  collateral  impeachment  of  charter  applies 
to  all 505 

MODIFICATION  OF  CHARTER 

right  of,  by  legislature 65 

to  be  made  according  to  existing  forms 65 

MONTHLY 

periodical  payments  may  be 374 

premium    payable,    unlawful   without  distinct   statutory 
authorization 392-393 

MORAL  OBLIGATION 

as  to  compensation  of  officers , 226  and  note, 

MORTGAGE  BY  BUILDING  ASSOCIATIONS 

how  far  enforceable  (see  BORROWING  POWERS) 302 

cannot  be  defended  against  by  terre-tenant  because  society 
dissolved 495 

MORTGAGE  TO  BUILDING  ASSOCIATIONS 419-440 

assets,  mortgages  not,  for  winding  up,  but  for  taxation... 440,  492 
assignment  of,  by  trustees  of  unincorporated  society,  when 

good 519 

on  expiration  of  society 332 

vest   in   successors   of   resigning   or   dying 

trustees  without 233 

of  unincorporated  society  vest  upon  incorpo- 
ration without 520 

cancellation  of,  by  attorney  when  set  aside 247 

by  secretary  of  unincorporated  society,  when 

void 519 

characteristic  feature  of. 422 

covenants  in,  for  faithful  performance  of  duties  include  con- 
tribution to  losses...  107 
upon    what    implied 

condition 496n. 

for  reference  to  referees  on  default,  to  ascer- 
tain amount  due,  valid 177  n. 

what,  lawful 382,  432 

for  stock  payments,  &c 423,  424 

what,  sufficient  for  continuance  of  dues  to  end 

of  society  or  series 423». 

as  to  default 425 

implied,  to  make  up  difference  between  pro- 
ceeds of  sale  and  whole  sum  due 429 


INDEX.  619 

MOETGAGE  TO  BUILDING  ASSOCIATIONS— Continued. 

covenants  in,  how  far  security  for  losses 496n. 

for  payment  of  dues,  effect  and  validity  of. 424 

relation  of  fines  to  (see  FINES) 404 

unlawful,  when  may  be  reformed  and  enforced..  420 
discharge  of,  member  bound  on  covenant   for  dues,  &c., 

after 90,  164 

stands  for  dues  after  repayment  of  loan..88,  90,  372 

by  sheriff's  sale  under 429 

not  necessarily  discharge  of  debt 429 

land  primary  source  for,  and  satisfaction  of 

debt 365 

conditions  of  repayment  and,  under  terms  of..  159, 

160, 172 
form  of  mortgage  does  not  affect  rules  as  to...  157 

by  judicial  sale,  repayment  of  loan  after 174 

errors  and  omissions  in 420,  433,  434 

estoppel  by  recitals  in,  upon  married  woman,  party  to 71 

maker  denying  corporate  exist- 
ence   513,  514 

purchaser  under,  denying  speci- 
fic powers 514 

what   is  not  variance  between 

bond  in,  and  bond  shown  519  n. 

foreclosure  of,  properly  within  equity  jurisdiction 424 

basis  of  equity  jurisdiction  in 428 

in  equity,  preliminary  account  and  its  object..  177 

evidence 245  ». 

fines  to  be  allowed  on,  exparte 404 

nature  of  proceedings  by  scire  facias  in 495  n. 

forms  of,  examinations  of  the  various,  their  propriety  and 

adequacy 421-422 

merger  of ,  in  ownership  of  land 429 

mortgageable  estates :  statutes  relating  to  mortgages  on  real 
estate  have  no  reference  to  chattel 

mortgages 419  n. 

on  equitable  titles 419  and  note. 

on  leaseholds 419,  425n. 

nature  and  construction  of:  is  understood  to  be  for  full  term 

of  society's  running  although 

otherwise  written 150  n.,  331, 

332,  421,  492 

when  written  for  specific  sum...  153, 

157,  389 


320  INDEX. 

MORTGAGE  TO  BUILDING  ASSOCIATIONS— Continued, 
nature  and  construction  of:  when  written  for  specific  sum  and 

time 153,157 

intended  as  collateral  security 

during  society's  running.. 371 

in  what  sense  a  col  lateral  security  429 
bond  accompanying,  is  the  prin- 
cipal debt 365 

lawfully  executed,  binds  all  par- 
ties in  interest 386 

purchaser  subject  to,  bound  by 

its  terms 386  n. 

purchaser  subject  to,  when  bound 

to  pay  dues 435 

when  silent  as  to  fines 404 

for  payment  of  dues,  &c.,  effect 

and  validity  of. 424 

not  void  for  uncertainty 424 

is  really  for  discharge  of  indefi- 
nite number  of  small  pay- 
ments   424 

terms  of,  preclude  withdrawal...  430 

how  treated  on  ejectment 311  n. 

what  may  be  included  in 383 

form  and  substance  must  con- 
form to  statute  and  by-laws....  356, 

420  and  note. 
form,    <fcc.,    of,    when    left    to 

society's  discretion 420anrf  note. 

.stipulations   not  warranted    by 

statute  and  by-laws  void 420 

original  and  legitimate  form  of..  421 
examination  of  various  forms  in 
use,  their  propriety  and  ade- 
quacy  421-422 

held  collectible  as  among  pri- 
vate persons 503 

partiesto:  infants  in  Maryland 70». 

married  women,  what  recoverable  on 316-318 

wife's  for  husband's  liability  covers  fines,  &C..95, 318, 404 
by  stranger  or  wife  for  member's  debt  is  good  for 

all  his  engagements 312,  382 

joint,  of  member  and  non  member 882 

tee  APPLICATION  OF  STOCK  ;  GUAKANTOR  ;  MARSHAI/- 
UNO  OF  ASSETS. 


INDEX.  621 

MORTGAGE  TO  BUILDING  ASSOCIATIONS—  Continued. 

power  to  sell  under,  notice  of  extent  of  agent's  authority 246 

present  value  of,  rule  for  computation  of. 154-155,  158-164, 

175,  177,  336,  375,  427,  428 

rule  same  at  law  as  in  equity 428 

where  court  cannot  look  beyond  mortgage 

to  ascertain  amount  due  on 404 

whether  court  can  ever  do  so 426 

recording  of,  notice  to  purchaser 433 

but  not  as  to  marshalling  of  assets  (see  MAR- 
SHALLING OF  ASSETS) 469 

relation  of  amount  of,  to  value  of  property 387 

remedies  upon,  concurrent 436 

right  to  take,  involved  in  power  to  lend  or  advance 419 

stock-payments  applied  to 154-156, 159-164, 175-176,  453-459 

are  not  ipso  facto  payments  to 431,  440n.,  452, 

455-457,  462,  465,  518 
see  MARSHALLING  OF  ASSETS. 

suit  on,  must  show  present  right  of  recovery 258 

after  incorporation,  where  mortgage  received  before  520 

taxation  of. 438,440 

terms  of ,  preclude  withdrawal 430 

usury  in,  what  is 420n. 

who  may  defend  against.. 363-365 

see  USURY. 

to  unincorporated  building  associations,  validity  of. 518 

assignment  of,  when  good 519 

cancellation  of,  when  void 519 

reservations  of  premiums,  &c.,  in  (see  LOANS) 341,  344, 

345,  351,  355,  356,  518 
MORTGAGEABLE  ESTATES 419 

MORTGAGEE 

may  have  action  against  mortgagor  for  difference  between 

proceeds  of  sale  and  whole  debt 429 

may  exercise  all  powers  concurrently 436 

right  of,  of  entry  after  dissolution  of  society  on  premises 

mortgaged  by  it 495 

equities  of,  superior  to  those  of  judgment  creditors 467 

in  possession,  rights  of. 432 

junior,  whether,  may  set  up  usury  in  first  mortgage 363-366 

need  not  ordinarily  search  beyond  face  of  prior 
mortgage 419  n. 


622  INDEX. 

MORTGAGEE— Continued. 

junior,  right  of,  to  marshal  assets  and  compel  application 

of  mortgagor's  stock  to 'debt 460-466,  468-469 

rights  of,  upon  sale  under  prior  mortgage 460n. 

see  MARSHALLING  OF  ASSETS. 

MORTGAGOR 

see  BORROWER  ;  ESTOPPEL  ;  MORTGAGE. 
to  building  association,  when  estopped  from  denying  cor- 
porate existence 513,  514 

vendee  of,  when  similarly  estopped 514 

MORTMAIN  ACTS 

shares  in  land-societies  not  within 444n. 

MULTIFARIOUSNESS 

what  is  not,  in  bill  in  equity  for  settlement  of  society 482  n. 

MUNICIPAL  CORPORATION 

analogy  between  officers  of  building  association  and  of, 

claiming  salaries  without  express  contract 226 

1UTUALITY  OF  THE  BUILDING  ASSOCIATION  SCHEME 

129,  146-148,  226,  829,  335,  361,  386,  401,  456,  496,  497,  498,  501 

N. 
SAME 

if  identical  with  that  of  another  corporation,  objectionable..    51 

improper  assumption  of,  may  be  restrained 51 

merely  descriptive  of  locality,  does  not  become  exclusive 

property  by  user 51 

change  of,  cannot  make  building  association  a  land-society 

or  alter  its  powers „ 306 

NEBRASKA 

statutes  in,  relating  to  building  associations 29 

decisions  in,  relating  to  same,  collected 29  n. 

cases  in,  on  theory  of  loans  or  advancements 348 

NECESSARIES 

president's  contract  for,  binds  society 195 

NECESSARY  REPAIRS 

secretary's  contract  for,  binds  society 197 

NECESSITY 

*  of  seal  in  corporate  contracts 235,  237 

NEGLECT 

of  society  to  enforce  accounts,  Ac.,  does  not  discharge 

sureties 217 

of  members  to  pay  dues  does  not  dissolve  society.. 473 


INDEX.  623 

I 

NEGLIGENCE 

result  of,  in  drawing  rules,  articles  or  constitution 52 

of  directors  in  taking  security  for  loans 123 

directors  liable  for  gross 209 

compromise  cannot  be  opened  for  usury  where  applicant 

was  guilty  of. 360 

mere,  not  a  ground  of  forfeiture  of  charter 479 

of  officers,  when  a  ground  for  appointment  of  receiver 483 

of  agents,  when  society  liable  for 252 

see  AGENTS  ;  TORTS. 

what  is,  in  solicitor 214n. 

NEGOTIABLE  INSTRUMENT 

effect  of  affixing  seal  to 235 

warrant  drawn  by  president  on  treasurer  in  favor  of  with- 
drawing member  is  not  a 264  TV 

NEGOTIATION  OF  LOAN 

charges  for,  not  usurious 214  n.,  368 

"NET  VALUE" 

of  stock 449  n. 

NEW  HAMPSHIRE 

cases  on  theory  of  loans  or  advancements 844 

NEW  JERSEY 

statutes  in,  relating  to  building  associations 30 

decisions,  relating  to  same,  collected 30  n.,  and  Addenda. 

cases  in,  on  theory  of  loans  or  advancements 842 

NEWSPAPERS 

publication  in,  when  notice 250 

NEW  YORK 

statutes  in,  relating  to  building  associations 31 

decisions  in,  relating  to  same,  collected 31  n. 

cases  in,  on  theory  of  loans  or  advancements 345 

NEXT  OF  KIN 

cannot,  after  married  woman's  death,  set  up  her  coverture 
as  defense  to  usury  in  mortgage 317 

NOMINATION  OF  OFFICERS 

method,  &c.,  to  be  prescribed  in  articles 54  (6) 

NON-FEASANCE 

mere,  not  a  ground  of  forfeiture  of  charter. 479 

NON-MEMBERS 

see  STRANGERS. 


324  INDEX. 

NON-USER  OF  FRANCHISES 

does  not  ipso  facto  dissolve  society 478 

ia  not  ipso  facto  surrender  of  charter 476 

ia  aground  of  forfeiture  of  charter 478 

NORTH  CAROLINA 

statutes  in,  relating  to  building  associations 32 

decisions  in,  relating  to  same,  collected 32n 

cases  in,  on  theory  of  loans  or  advancements 347 

recovery  of  usury  paid  by  borrowing  member  in 361 

NOTE 

giving  of,  to  society  as  such  recognizes  its  corporate  exist- 
ence   85 

maker  of,  when  estopped  from  denying  corporate  exist- 
ence   513 

NOTES 

see  BANKING  POWERS;  BILLS  AND  NOTES;  BORROWING 
POWERS;  DISCOUNTING. 

abuse  of  power  of  society,  to  purchase  and  discount 310, 

311,  479 

society  may  take,  for  investment 311,  479 

given  in  settlement  of  account  cannot  be  defended  against 
for  usury 360 

NOTICE 

recorded  articles,  rules,  or  constitutions  are,  to  the  world...    62 
of  dues,  statutory  requirement  of,  as  to  calls,  inapplicable..    86 

member  not  entitled  to 86,  451 

to  deceased  member 74n, 

of  fines,  members  must  have,  by  by-law 98 

of  corporate  meetings,  right  to 113 

members  bound  to  take,  of  stated...  183 
also  of  general  character  of  busi- 
ness   183 

but  extraordinary  matter  requires 

special 183 

must  be  given  to  all  members 184 

but  may  be  waived  by  unanimous 

consent 184 

defects  in,  may  be  waived 184 

want  of,  cannot  be  setup  to  impeach 

meeting's  acts  collaterally 184 

of  special  meetings  must  be  per- 
sonal   184 


INDEX.  625 

NOTICE—  Continued. 

of  directors'  meetings 201 

absence  of,  can  be  waived  only  by  whole  num- 
ber of  directors 202  n. 

of  agent's  powers 243,  245 

how  far  person  dealing  with,  are  bound  to  take, 

of  agent's  powers 245 

party  so  dealing  must  take,  of  limits  necessarily 

coming  under  hid  observation 246 

of  ownership  of  stock,  when  society  affected  with 252 

of  right  to  compel  resort  of  one  of  two  funds  must  be  actual..  4(39 

of  withdrawal,  what  is 14 

member  not  bound  by  rules  made  after  his..  136  n. 
see  WITHDRAWAL. 

to  agent  and  directors,  what,  is  notice  to  society 250 

recitals  in  mortgage  how  far  complete 365n. 

recording  of  mortgage,  how  far  is 433 

purchaser  of  Bold  stock  without 445,  446 

NOTORIOUS 

fines  must  be 98 

NUL  TIEL  CORPORATION 

corporate  existence  cannot  be  inquired  into  collaterally  on 

plea  of. 208,221 

plea  of,  may  be  in  bar  or  in  abatement 261  and  note, 

how  answered 504 

same  rule  us  to  answer  to,  under  all  forms  of  incor- 
poration   505 

defendant  may  show  under,  that  plaintiff  is  not 

a  corporation  de  facto  or  dejure 509 

lapse   of  charter  by  original   limitation   may   be 

shown  under 509 

what  may  be  shown  under 509-512 

when  party  estopped  from  setting  up 513-516 

NUMBER 

of  shares  should  be  set  forth  in  articles,  &c 54  (2) 

votes  each  member  entitled  to,  also 54  (6) 

of  directors,  effect  of  election  of  greater  or  lees,  than 
required 190 

O. 

OATH  OF  OFFICE 

by-law  prescribing,  when  void 277 

ftl 


626  INDEX. 

OBEDIENCE  TO  RULES 

members  bound  to 83,  271 

nor  absolved  from,  by  fraud  in  obtaining  charter 306 

nor  by  unlawful  change  of  character,  Ac.,  of  the  society 309 

OBJECT  OF  BUILDING  ASSOCIATION 
see  DESIGN. 

OBLIGATION  OF  CONTRACTS 

cannot  be  impaired  by  by-law  (tee  LEGISLATURE) 278 

OBLIGATIONS 

of  members,  mutuality  and  reciprocity  of. 147-148 

of  borrowing  members  stand  for  dues  after  repayment  of 

loan  secured 88-90,  164,  372 

written  for  repayment  of  specific  sum  at  specific  time, 

meaning  of. 153, 157 

form  of,  does  not  affect  rules  as  to  repayment 157 

not  affected  by  illegal  conduct  of  society  or  officers..  172, 

289,  303,  305,  309 

effect  of  dissolution  of  society  on 496-503 

OFFENSES  JUSTIFYING  AMOTION 220 

OFFICE 

every  member  has  right  to  be  elected  to,  and  hold 114 

borrower,  pledgor  of  his  stock,  retains  this  right 148 

official  bond  when  a  prerequisite  to  entering  upon 215 

when,  may  be  filled  by  two  persons 251  n, 

by-law  creating  a  new,  void 277 

OFFICER 

to  whom  periodical  payments  to  be  made  to  be  specified 

in  articles 54  (4) 

interest  to  be  paid,  ditto 54  (5) 

sureties  of,  not  bound  where  election  void 218 

on  re-election  must  give  new  bond 219 

dejure  entitled  to  salary  annexed  to  office 224 

whose  term  is  fixed,  with  salary  annexed,  may  sue  therefor 

on  improper  removal.. 229 

executing  deed  may  also  make  acknowledgment 234 

OFFICERS 

nomination,  election,  duties,  powers,  terms,  remuneration 

and  removal  to  be  provided  for  in  articles 54  (6) 

attention  of,  to  duties  enforced  by  fines 103 

illegal  conduct  of,  cannot  relieve  society  from  executed  con- 
tract   109 

nor  borrowers  from  their  obligations  to 
society 172,  289 


INDEX.  627 

O  FFICERS—  Continued. 

illegal  acts  of,  may  be  restrained  at  instance  ot  members...  114  n. 

investments  by,  when  should  be  restrained 121 

proceedings  by,  liability  of,  to  suit  by  members  for...  213 

parties  to  bill  in  such  case 199  n.,  269 

liability  to  fines  and  amotion  for 220 

personal  liability  for,  and  misman- 
agement by 482 

and  fraudulent  mismanagement  by,  when  ground 

for  appointment  of  receiver 483 

required  to  offer  money  to  members  at  stated  intervals 115 

cannot  arbitrarily  withhold  approval  of  withdrawals 135 

when  without  discretion  as  to  calling  of  meetings 184 

election  of. 188-190 

principal  function  of  corporate  meeting 188 

failure  of,  does  not  dissolve  society 188,  473,  484 

upon,  the  old  officers  hold-over 188 

de  facto  may  bind  society  by  contracts 192 

acting  publicly,  presumed  to  be  so  rightfully 192 

may  have  action  of  trespass  against  others  claiming 

to  be  board  of  directors 192  n. 

and  dejure,  rights  of,  respectively  to  claim  salary...  228 

compensation  of 223-230 

must  look  to  corporate  funds  for 230 

when  fixed  by  charter  or  contract,  cannot 

be  varied  by  by-law 284 

do  not  work  on  same  terms  as  professional  men 230 

interest  of,  in  society 230 

powers  of,  general  extent  of,  and  liabilities  of. 194-230 

as  to  relation  between,  and  society  and  third  par- 
ties governed  by  law  of  agency 241 

are  those  of  agents,  they  being  agents 241 

notice  of,  whether  defined  by  charter  or  by-law..  243  n. 

act*  of,  cannot  be  collaterally  impeached 192 

liability  by  reason  of,  ultra  vires 284 

of  building  association  have  its  entire  business  in  hand 193 

who  are  the  usual 194 

in  what  sense  directors  are 208 

who  are,  properly  so-called 208 

society  not  having  any  responsible,  no  ground  for  interfer- 
ence of  chancery 484 

criminal  liability  of. 221,  222 

in  unincorporated  building  associations 519 


628  INDEX. 

OFFICERS—  Continued. 

agency  of,  therein 519 

sec  .AGENTS;  DIRECTORS;  ELECTION;  PERSONAL  LIABILITY. 

OFFICIAL  BONDS  (see  SURETIES) 215-219 

what  officers  shall  give,  to  be  determined  by  society 215 

approval  of. 216 

extent  of  liability  of  sureties  on 219 

validity  of  certain 216 

OHIO 

statutes  in,  relating  to  building  associations 33 

decisions,  relating  to  same,  collected 33  a 

cases  on  theory  of  loans  or  advancements 853 

OMISSION 

of  one  required  signature  to  certificate  of  incorporation 

fatal 208 

in  process  of  incorporation,  ground  of  forfeiture  of  charter..  480 
to  effect  officers  does  not  dissolve  society 473 

OMISSIONS  AND  ERRORS  IN  MORTGAGE 420,  433,  434 

ONUS  OF  PROOF 

in  suit  by  officer  against  individual  director  for  salary 230 

see  BURDEN  OF  PROOF. 

OPERATIONS  OF  BUIDING  ASSOCIATION 

description  of  practical 8-11 

nature  of,  involves  time  and  risk 129 

temporary  suspension  of,  effect  of. 500 

OPPRESSION 

what  constitutes  in  usurious  loans 359 

OPPRESSIVE  FINES 410,  412,  413 

court  will  relieve  against 97 

OPPRESSIVENESS 

without  fraud  not  itself  an  excuse  for  non-performance 386 

ORDER 

drawn  by  president  on  treasurer  in  favor  of  withdrawing 
member  not  a  negotiable  instrument 310  n. 

ORGANIC 

law  of  society,  what  is 52 

ORGANIZATION  (see  FORMATION  ;  INCORPORATION) 50-67 

with  defective  capital  (see  ESTOPPEL)... 85,  288  and  note,  442,  515 
defect  in,  cannot  be  inquired  into  collaterally  (see  DEFECTS; 

IRREGULARITIES).... 475  n.,  504,  506 

comnensation  for  services  before 227  and  note. 


INDEX.  629 

ORIGINAL 

contract  between  society  and  member 127 

limitation  of  corporate  existence,  when  takes  effect 493 

lapse  of  charter  by,  may  be  shown 509 

OUSTER 

discretion  of  court  as  to,  whether  from  illegal  powers  or 
from  corporate  franchise 323,  325,  479 

OUTSIDERS 

see  STRANGERS. 

OVERDRAWING 

bank  account  is  not  borrowing 294,  300 

OWNER  OF  STOCK 

may  have  action  against  society  for  refusal  to  transfer  on 
books 268,448-449 

OWNERSHIP  OF  STOCK 

society  need  not  look  beyond  corporate  books  for 78,  446 

how  determined 78 

evidence  of. 446,  447 

P. 
PAID-UP 

or  par  value  of  shares,  what  meant  by,  generally 12 

in  permanent  societies 46 

should  be  fixed  in  articles 54  (2) 

member  cannot,  qua  stockholder, 

sue  for  at  law 144,  265 

difficulty  of  ascertaining  when  stock 

has  reached 490 

settlement    how   compelled   when 

stock  has  reached 490-491 

what  financial  condition  must  be  shown  to  prove  that 

stock  is 492 

society  expires  when  stock  is 473 

PAR  VALUE 

see  PAID-UP  VALUE. 

PAR  DELICTUM 

doctrine  of,  applied  to  borrowers  at  usury  from  society 361 

PAROL 

contract,  what  is,  in  contract  of  loan,  as  to  repayment 439 

for  repayment  where  not  merged  in  security  of 
higher  nature 429 


630  INDEX. 

PAROL—  Continued. 

evidence,  when  admissible  to  show  contract  to  be  that  of 

society,  not  of  agent  individually 249r* 

admissible  to  show  assignment  of  stock  absolute 

on  face  to  be  merely  as  collateral SSOtk 

PARTIAL 

failure  of   consideration,  when    terre-tenant    may    defend 

against  usurious  mortgage  on  ground  of. 364  n.,  365 

payments  of  dues  not  counted  in  computing  period  of 

default 259 

stock-payments  are  not,  on  loan 452 

interest  allowed  on 452 

doctrine  of,  applied  to  borrower's  liability  upon 
premature  dissolution 496 

PARTICIPATION 

in  fraud,  what  is 210,  211 

in  business  and  profits  estops  from  denying  proper  organ- 
ization   516 

PARTIES 

to  bill  by  member  against  delinquent  officers 199  n.,  213 

to  certain  other  actions 269 

to  bill  for  appointment  of  receiver 488 

to  suit  by  incorporated  society  on  mortgage  received  before 

incorporation 520 

see  ACTIONS  ;  PARTY. 

PARTNERS 

members  of  incorporated  society  are  not 335 

of  unincorporated  society  are 517 

PARTNERSHIP 

incorporated  society  is,  with  corporate  rights 485,  517 

unincorporated  society  is  merely  a 517 

law  of,  applies  to  unincorporated  society 517 

dealing,  whether  transaction  of  loan  is 338-357 

PARTS 

of  years  not  regarded  in  computing  rebate  allowed  per 
unexpired  year  on  repayment 166 

PARTY 

where  society  must  be  to  action  (see  ACTIONS) 269 

PASS-BOOK 

see  RECEIPT  BOOK. 

evidence  of  payment,  loss  of. 260 


INDEX.  631 

PATENT 

incorporation  by 56,  59 

PAWN 

see  HYPOTHECATION. 
PAYMENT 

of  dues,  details  as  to,  to  be  fixed  by  articles 54  (4) 

partial,  when  not  counted  as  to  default 259 

not  ipso  facto  payment  to  mortgage 374,  452, 

455-457,  462,  465,  518 

of  interest,  details  as  to,  to  be  fixed  by  articles 54  (5) 

of  debt,  burden  of  proof  under  plea  of 260,  493  ?v 

certainty  required  in  borrower's  allegations  of 260 

by  application  of  stock  to 453-459 

see  APPLICATION  ;  MARSHALLING  OF  ASSETS. 

to  agent,  when  not  payment  to  society 319 

PAYMENTS. 

see  PERIODICAL  PAYMENTS. 

borrower  to  be  credited  with  what,  on  repayment 156 

of  borrower  not  applied  to  his  indebtedness  as  they  come  in  329 

upon  stock  are  not  payments  upon  loan  (see  PAYMENT) 374, 

452,  455-457,  462,  465,  518 

in  building  associations  must  be  small  but  frequent 329 

PENALTIES. 

see  FINES  ;  FORFEITURES. 

fines  are  not 94,  402-403,  415 

agreed    upon    for    breach    of  contract,   courts    will    not 
enforce 402,  407 

PENDENCY 

of  suit  on  mortgage  does  not  stop  dues,  fines  and  interest 91, 

178,  377,  418 
PENNSYLVANIA 

statutes  in,  relating  to  building  associations 34 

decisions  in,  touching  same,  collected 34  note  and  Addenda. 

cases  on  theory  of  loans  or  advancements 351 

corporations  in,  not  liable  impliedly  for  compensation  to 

officers,  &c 226 

doctrine  in,  as  to  application  of  stock  to  debt,  marshalling 

of  assets,  &c 462-464 

PERCENTAGE 

of  money  loanable  on  property  by  building  associations....  387 
premium    cannot  ordinarily  be  reserved   merely  as  in- 
creased  „ 892-393 

tee  PREMIUM. 


632  INDEX. 

PERFORMANCE 

of  membership  duties  properly  secured  by  mortgage 88 

PERIOD. 

of  maturity  of  stock,  how  described 40 

of  default  for  non-payment  of  dues,  how  computed 259 

of  society's  duration,  how  fixed -±74 

fixing  of,  for  repayment  in  security,  effect  of. 332 

for  winding  up,  effect  of  arrival  of. 472-473 

PERIODICAL  PAYMENTS 

details  as  to,  to  be  fixed  in  articles,  &c 54  (4)  (5) 

advantage  and  importance  of  small  and  frequent 329 

may  be  monthly  or  weekly 374 

PERMANENT  SOCIETIES 
see  SERIAL  SOCIETIES. 

strictly  so  called 46 

popularity  of,  in  England 46 

in  America  (see  SERIAL  SOCIETIES) 46 

advantages  of,  to  borrowers  and  investors 46 

"  paid-up  "  shares  in 46 

repayment  or  redemption  in 46,  175n.  180 

liabilities  of  members  in 180 

loans  in 376 

difference  between  serial  societies  and 49 

terminating  and,  as  to  rules  for  forced 

repayment,  none 175  n 

PERPETUAL  SUCCESSION. 

what  is  meant  by 233 

building  associations  have 233 

PERSONAL 

defense,  when  usury  is  a „ 363,  364  n 

liability  of  agent  on  contracts  intended  to  be  those  of 

society 248,  249 

or  officer  by  reason  of  contracts  ultra 

vires 198,  284 

of  directors 209-213 

none  for  errors  of  judgment 204 

in  case  of  gross  negligence  in  taking 

security 123 

for  contracts  ultra  vires , 198,  284, 

295,  299  n.,  307 

for  losses,  &c 209-210 

for  loans  contracted  ultra  vires 295, 

299  n.,  307 


INDEX.  633 

PERSONAL—  Cordinued. 

liability,  of  managers  of  inchoate  society  for  expenses... 50, 110 
of  members,  claims  of,  as  creditors  a  set  off  against,  110 

for  corporate  debts 110,  111 

measure  of. 110 

to  render  personal  services 83,  103,  226 

how  enforced 103 

of  officers,  for  mismanagement  (see  DIRECTORS; 

OFFICERS) 482 

of  treasurer  for  moneys  paid 196 

prerequisites  of  membership  to  be  fixed  in  articles 54  (4) 

property,  shares  of  stock  are 444 

security,  whether  society  may  advance  funds  on 311 

PERSONALITY 

attributed  to  corporations 233 

PETITION 

for  appointment  of  receiver,  what,  must  show 483-485 

who  may  present 488-489 

for  winding  up  by  unpaid  withdrawing  members  deferred  to 

give  society  time  to  collect  money 488«i 

must  proceed  from  members  as  such 491 

when  borrower  cannot  present 491 

what  financial  condition  must  appear 492 

when  dismissed  without  costs 489 

PLACE 

of  business  to  be  fixed  by  articles,  &c 54  (1) 

for  payment  of  subscriptions,  &c.,  likewise 54  (4)  (5) 

of  annual  meeting,  likewise 54  (8) 

of  corporate  meeting,  cannot  be  fixed  out  of  county 183 

of  general  meeting,  when  members  bound  to  take  notice  of..  183 

when  members  to  be  notified  of. 183 

PLEA 

of  no  funds,  when  no  defense  to  judgment 139,  141-143 

of  nultiel  corporation  (see  NUL  TIEL  CORPORATION) 208,  221, 

261  and  note,  504-516 

of  payment,  burden  of  proof  under  (see  PAYMENT) 260,  493  n. 

of  ultra  vires,  who  may  set  up  (see  ULTRA  VIRES) 285-292 

of  usury,  who  may  setup  (see  USURY) 363-365 

must  conform  to  statute 367 

PLEADINGS 

see  ALLEGATIONS;   AVERMENTS;   NUL  TIEL  CORPORATION* 
PAYMENT  ;  ULTRA  VIRES  ;  USURY. 

in  criminal  proceedings  against  officers 222 

in  actions  by  and  against  building  associations 257-263 


634  INDEX. 

PLEDGE 

see  HYPOTHECATION. 
PLEDGEE 

levy  on  stock  in  hands  of. 450 

PLEDGOR 

rights  of,  over  stock 113,  148,  450 

POLICY 

motives  of  public,  in  establishing  and  legalizing  building 
associations  (see  DESIGN) 75,  118,  4 

of  management  of  society  to  be  prescribed  by  corporate 
meeting 188 

public,  as  to  sureties'  liability  on  official  bond 219 

as  to  implied  liability  of  corporations  for  salaries...  226 
POLLS 

may  be  adjourned  from  day  to  day 191 

discretion  of  inspectors  of  election  as  to  closing 191 

POPULAR 

sense  in  which  dues  are  regarded  as  payments  on  loan 452 

POSSESSION 

of  official  bond  when  proof  of  acceptance 216 

mortgagee  in,  rights  of. 432 

POTESTAS  NON  POTEST  DELEGARI. 204 

POWER  OF  ATTORNEY 

to  transfer  stock  signed  in  blank 445,  446 

POWERS 

of  association,  general  discussion  of 231-281 

to  organize  with  deficient  stock 85 

in  excess  of  statute  void  and  cause  of  for- 
feiture of  charter,  though  granted  therein..  64, 

232,  291 

supreme,  vested  in  corporate  meeting 181 

to  maintain  suits  and  actions  (see  ACTIONS).. 

254-256 

to  pass  by-laws  (see  BY-LAWS) 271-281 

to   borrow    money   (see    BORROWING    POW- 
ERS)  293-302 

to  build  houses 301 

to  acquire  and  hold  real  estate  (see  REAL 

ESTATE) 303-308 

to  take  security  for  loans  or  advancements.. 

380,419 
what,  implied  from  express  grant  of. 232 


INDEX.  635 

POWERS— Continued. 

of  association,  limited  by  statute  and  charter 232,  405 

by  spirit  of  enactment 273 

to  objects  within  legitimate  scope  of 

statute  and  charter 283 

to  impose  fines  depend  upon  statute  and 

charter 96,405 

to  amend  where  charter,  constitution,  &c., 

recorded 62 

enlargement  of,  cannot  be  asked  by  directors 

alone,  and  if  so  granted  is  void 200 

want  of  specific,  claimed  under  charter  may 

be  shown 510 

specific,  claimed,  who  estopped  from  deny- 
ing   514 

of  unincorporated  societies I 517,  518 

abuse  or  misuse  of  (see ULTRA  VIBES). .285-292,  325 
as  to  lending  money. ..310-321 

of  adjourned  meeting 185 

of  agents  (see  AGENT) 243 

extent  and  limits  of. 245 

how  far  notice  to  persons  dealing  with..  245 

of  directors,  extent  and  limits  of. 198-200 

delegation  of. 204 

how  to  be  exercised 206  n 

in  granting  loans  beyond  stock  interest 126 

see  DIRECTORS  ;  OFFICERS. 

of  executor  or  administrator  of  deceased  member 73 

of  infants  and  married  women  as  members 70 

tee  INFANTS  ;  MARRIED  WOMEN. 

of  legislature  to  modify  charters.. 65 

to  alter  remedies 67 

to  remit  taxes 438 

tee  LEGISLATURE. 

of  members :  see  MEMBERS  ;  RIGHTS  OF  MEMBERS. 

of  mortgagee  in  possession 432 

may  all  be  exercised  concurrently 436 

of  officers  (see  OFFICERS) 194-230 

to  be  fixed  in  articles 54  (6) 

of  president  and  vice-president 195 

of  secretary 197 

of  treasurer 196 

PRACTICAL 

operation  of  building  associations,  description  of. 8-11 


636  INDEX. 

PRACTICAL—  Continued. 

operation  of  by-law  an  element  in  determining  legality 274,  • 

349-350 
results  of  building  association  loans  or  advancements 387 

PREFERENCE 

member's  right  to,  when  applying  for  loan,  over  outside 
investments 116-121 

PRELIMINARY 

account  in  equity  as  basis  of  order  of  sale  on  foreclosure..!??,  428 

eflect  of  payment  of  balance  found  due  upon 428 

expenses  in  formation  of  socieiy 50,  110 

liability  of  promoters  for 50 

rules  to  be  observed  as  to 50 

eflect  of  incorporation  upon  liability  for 50, 110 

PREMATURE 

dissolution,  effect  of,  on  borrowers'  contracts 386,  496-503 

whether  unanimous  consent  required  to 474 

borrowers'  liability  for  expenses  and  losses  how 

affected  by 496n» 

losses  on,  chargeable  on  assets 496  n.,  501 

suit  against  borrower,  dues,  fines  and  interest  do  not  stop 
running  during  pendency  of. 178 

PREMIUM  OR  BONUS 

what  is  meant  by 13 

definition  of. 378,  388,  398 

general  discussion  of. 388-400 

as  an  incident  to  loans  or  advancements 378 

"fixed"  or  "minimum,"  illegal 122,  394-397 

may  be  defalked  by  borrower  when 122 

when  rule  as  to,  does  not  prevent  society 

from  recovering  premium  bid 122 

borrower  contracts  to  allow  society 149 

not  recoverable  from  strangers  borrowing 313-316 

from  infants  and  married  women   mem- 
bers  316-318 

tee  MARRIED  WOMEN. 

when  considered  an  additional  undertaking 334 

usury  in,  left  to  jury 338,  344,  346 

not  held  usurious... 338-346,  352,  853 

held  to  be  usurious 347-852 

decisions  touching  legality  of,  in  the  various  states,  col- 
lected.... ...383  and  nott* 


INDEX.  637 

PREMIUM  OR  BONUS— Continued. 

when  not  included  in  "loan" 384 

upon  re-loan 384 

borrower  not  in  tended  to  pay,  for  more  years  than  he  keeps 

loan 384 

true  nature  and  method  of  payment  of. 389-390,  398,  457 

regarded  as  a  deduction 390  n.,  891 

must  be  gross  sum  per  share 392,  393 

basis  of  computation  of. 391 

cannot  be  added  to  loan 391 

must  be  ascertained  by  free  competition 394-397 

justification  of. 394,  496 

advantage  to  borrower,  if  below ;  loss,  if  above  average..395,  457 

when  not  recoverable  from  borrower 397 

interest  upon 398,  421,  482n 

to  be  accounted  for  on  winding  up 398 

abatements,  discounts,  and  remissions  on,  when  allowable 

and  when  obligatory 399^00 

not  a  prepayment  or  deduction 390,  398,  457 

when  interest  not  chargeable  on,  in  settling  society's  affairs 

in  equity 482a 

in  unincorporated  societies  (see  LOAN) ...  518 

PREPAYMENT 

premium  is  not  a 390,  398,  457 

PREREQUISITES  OF  MEMBERSHIP 

to  be  set  forth  in  articles 54  (4) 

PREROGATIVES  OF  MEMBERSHIP 

see  MEMBERS  ;  RIGHTS  OF  MEMBEKS. 

PRESENT  VALUE  OF  MORTGAGE 
see  MORTGAGES. 
rule  for  computation  of. 154-155, 158-164,  175, 

177,  336,  375,  404,  426,  427,  428 
PRESIDENT 

functions,  &c.,  of.. 195 

to  sign  contracts  and  execute  deeds 195 

contract  of,  for  necessaries,  when  binding 195 

may  contract  with  society 207 

has  custody  of  corporate  seal 234 

PRESUMPTION 

as  to  assent  of  individual  members  to  corporate  acta 181, 

278,410 
see  DISSENTING  MEMBERS. 


638  INDEX. 

PRESUMPTION— Continued. 

as  to  assent  to  valid  by-laws 271 

of  minority  not  universal 410 

as  to  existence  of  agency  from  former  employment 244 

person's  being  permitted  to 

act  as  agent 244 

as  to  powers  of  agents  to  contract 243,  383  n 

that  borrower's  payments  were  for  dues  and  fines 260 

as  to  balances  acknowledged  due  to  withdrawing  members  266 
none  against  society  taking  other  than  customary  security..  311, 

880-381 

as  to  usury  where  officer  receives  bonus  for  loan 868 

as  to  necessary  amount  of  capital  stock 441 

as  to  withdrawal  balances  (see  WITHDRAWAL  BALANCES) 266 

PRESUMPTIVE  FRAUD 211 

PREVALENCE 

and  importance,  present,  of  building  associations 6 

PRIM  A  FACIE 

charter,  showing  of,  sufficient  answer  to  plea  of  nul  tiel  cor- 
poration 504 

PRIMARY 

design  and  object  of  building  associations  (see  DESIGN) 7,  40, 

75,  113, 118-120,  283,  392,  398,  413 
fund  for  payment  of  debt,  land  mortgaged  is 365 

PRINCIPAL 

when  liable  for  agent's  torts  (see  AGENT) 252 

method  of  repayment  of,  in  building  association  loans 328 

and  interest,  repayment  of  loan  proceeds  upon  basis  of.....  326, 

327,  331,  334 

stipulation  for  return  of,  not  improper  in  mortgage 331 

effect  of. 389 

when  invalidates  mortgage 420 

PRIOR  IN  TEMPORE  POTIOR  IN  JURE. 461 

PRIORITY 

rule  for  competition  among  withdrawing  members  for, 
void 132,276 

all  members  entitled  to,  over  fraudulent  directors  on  dis- 
tribution, when 211,  487 

of  payment,  order  of,  on  distribution  of  insolvent  society's 
assets....  486 


INDEX.  639 

•PRIVATE 

instructions  to  agents  do  not  affect  persons  dealing  in 
ignorance  thereof  bona  fide 243 

persons  cannot  enforce  forfeiture  of  charter  (see  FOR- 
FEITURE)  481  and  note,  508 

PRIVILEGE 

of  receiving  loan  or  advancement,  nature  of.. 43, 115,  444 

PROCEEDINGS 

l>y  individual  members  against  delinquent  officers 114,  213 

see  ACTIONS  ;  DIRECTORS. 

PROCEEDS  OF  SALE  UNDER  MORTGAGE 

remedy  where,  insufficient  to  cover  whole  sum  due 429 

where  application  of,  to  debt  does  and  does  not  extinguish 
membership 431 

PROCESS 

by  and  against  building  associations,  how  regulated 256 

PROFITS 

sec  ACCOUNT. 

apportionment  of,  in  serial  societies 47 

members  entitled  to  share  equally  in 104,  114,  147 

account  of,  not  involved  in  member's  right  to  withdraw.,128,  129 

members  not  entitled  to,  before  winding  up 329, 

452,456 

proportion  of, which  a  member  may  claim  on  withdrawal.,130, 131 
when  withdrawing  member  must  be  allowed  some  share  of  131  n, 

mutuality  of. 147 

borrowers  have  share  in 147-148 

cannot  have  credit  for,  before  winding  up,  unless 

by  statute  or  rule 156 

redeeming,   may  claim    same    dividend  of,  as 

withdrawing  investors 162,  163,  430 

whose  loan  recovered  by  society  and  member- 
ship continues,  entitled  to  share  in  final  dis- 

bution  of 176 

impossibility  of  accounting  for,  before  winding  up 456 

what  are,  for  purposes  of  taxation 470 

participation  in,  estops  party  from  denying  society's  cor- 
porate existence 516 

and  loss  account  included  in  borrower's  true  indebtedness..  152 

PROGRESSION 

arithmetical,  in  fines 412 


640  INDEX. 

PROHIBITION 

effect  of  statutory  or  constitutional,  upon  the  exercise  of 

certain  powers 285,  287-288,  325 

in  statute  or  constitution  of  state  not  removed  by  grant  in 

charter  under  it 291 

PROMISED  LOAN 

what  action  members  may  have  for  subsequent  refusal  of..  124, 

245  n.,  267 
PROMISSORY  NOTES 

see  BILLS  AND  NOTES  ;  BANKING  AND  BORROWING  POWERS  ; 
DISCOUNTING. 

PROMOTERS 

of  inchoate  building  association,  liability  of,  for  expenses..50,  110 

PROOF 

see  EVIDENCE. 

of  acts  and  contracts  of  directors 205 

of  agency,  when  on  borrower  (see  BCRDEN  OF  PROOF) 260 

of  common  seal 236 

of  corporate  existence,  what  sufficient  (see  NUL  TIEL  COR- 
PORATION)   504 

of  incorporation,  need  not  be  made  under  general  issue....  261 

of  maturity  of  stock,  under  plea  of  payment 493  n 

of  payments 260 

of  service  by  initials  and  abbreviations  endorsed  on  writ...  257 

in  criminal  prosecution  against  officer 222 

in  suit  by  officer  against  individual  director  for  salary 230 

PROPERTY 

see  CORPORATE  PROPERTY. 

when,  may  be  followed  into  hands  of  stockholders Ill 

uncertain  nature  of  building  association's 129 

in  whom  laid  on  criminal  prosecution  against  unfaithful 

officers 222 

in  stock,  nature  of. 444 

PROPORTION 

of  loan  grantable  to  member's  stock  interest 126 

on  mortgage  to  value  of  property  mort- 
gaged   387 

PROPORTIONATE 

allowance  of  rebate  on  premium  for  fractions  of  year 166 

PROTEST 

of  majority  against  election,  effect  of. 189 

PROVISIONS 

to  be  made  in  rules,  articles  or  constitution 54 


INDEX.  641 

PROXY 

matter  of,  to  be  regulated  in  rules,  articles  or  constitution.  .54  (6) 
representation  by,  rigbt  of,  &c 187 

PUBLIC  POLICY 

underlying  building  association  scheme  (see  DESIGN)..75, 118,  478 

as  to  liability  of  sureties  on  official  bonds 219 

as  to  implied  liability  of  corporations  for  compensation 226 

PUBLIC  RUMOR 

is  not  notice  to  society 250 

PURCHASE 

of  land   under  junior  encumbrance  by  first  mortgagee, 

effect  of. 429 

tee  REAL  ESTATE. 
PURCHASE-MONEY 

how  far  mortgage  for,  by  society,  may  be  enforced 302 

equitable  lien  for 302,  307  n 

in  hands  of  third  parties 307 

PURCHASER 

whether,  may  set  up  usury  in  prior  encumbrance 363-365 

subject  to  usurious  mortgage  cannot  defend  on  usury 365 

to  building  ass'n  mortgage  bound  by  its  terms 386  n 

when  liable  to  pay  dues 435 

when   estopped  from   setting  up 

plea  of  nul  tiel  corporation 514 

when  cannot  deny  specific  powers 

claimed  by  society 514 

when  cannot  marshal  assets 466- 

equities  of,  superior  to  those  of  judgment  creditors 467 

for  value,  under  void  sale,  when,  may  recover  for  improve- 
ments   434 

of  stock  sold  but  not  transferred  without  notice, 

rights  of. 446 

defense  of,  against  mortgage  by  defunct  society...  495 n. 
equity  of  marshalling  assets  does  not  follow  prop- 
erty into  hands  of. 468, 

of  fee  simple,  when,  will  not  defeat  mortgage  on  equitable 

title 433 

of  stock  pledged  to  society  cannot  compel  its  abandonment 

and  resort  to  mortgaged  property 459 

PURPOSE 

of  building  association 7,  40,  75, 113, 118-120,  283,  392,  398, 413 

acquisition  of  dwelling  by  members 
an  essential  part  of. 39  n.,  11& 


642  INDEX. 

PURPOSE—  Continued. 

of  building  association  should  be  set  forth  in  articles 54  (1) 

court  may  define,  if  not  set  forth  in 

petition  for  incorporation 60,  273 

illegal    departure    from,  does    not 
relieve     members     from      their 

duties 200  n.,  309 

what  are  debts  contracted  for 307 

of  incorporation,  by-laws  must  conform  to 273 

may  be  specified  by  court  if  not  set  forth 

in  petition  for 60,  273 

defining  of,  belongs  to  State,  not  to  the 

;  ociety 480 

of  limitation  upon  funds  available  for  withdrawal 143 

of  corporate  seal 234 

of  recital  of  debt  in  mortgage 365n 

of  stipulation  for  stock  payments 371-372 

of  fines  in  building  associations 401 

Q. 

QUALIFICATIONS 

by-laws  imposing  new,  on  voters,  void 277 

QUANTUM  MERUIT 

for  services 226 

QUO  WARRANTO 

discretion  of  court  as  to  ouster  upon , 479 

charter  can  be  avoided  only  by  direct  proceedings  on 481 

QUORUM 

should  be  provided  for  in  articles 54  (8) 

of  corporate  meeting,  what  is 186,  187 

when  majority  of  all  members  required  to  187 

of  directors,  what  is  a,  to  do  business 202 

for  passing  by-laws 271  n, 

B. 

RATIFICATION 

when  unanimous  consent  of  members  will  work,  of  agent's 

or  officer's  acts  ultra  vires 169,  232,  307,  519 

of  acts  merely  in  excess  of  agent's  powers 245,  247 

when  implied 247 

of  torts,  &c.,  of  agents,  liability  of  society  by  reason  of. 252 

what  is  not 252n. 

by  unincorporated  society  validates  secretary's  unauthorized 

act 519 

of  acts  of  irregular  corporate  mee'ing 184 


INDEX.  64? 

READ 

ability  to,  not  a  bar  to  showing  mistake  in  recital  of  mort- 
gage due  to  fact  of  not  having  read  same 81 

REAL  ESTATE 

acquisition  of,  by  members  an  essential  part  of  building 

association  scheme 39  n.,  118 

see  DESIGN  ;  PURPOSE. 

corporate,  when  may  be  followed   into  hands  of  stock- 
holder  Ill,  485 n. 

member's  interest  in 335,  444 

conferring  authority  to  sell,  is  exercise  of  corporate  power..  206  n. 

appointment  of  agent  to  sell,  need  not  be  under  seal 235 

formalities  of  conveyance  of. 234,  235 

title  of,  sometimes  vested  in  trustees 214 

always  so  in  unincorporated  societies 518 

purchase  of,  right  of,  postponed  to  members'  right  to  receive 

loan 117 

propriety  of,  as  in  investment,  depends  on 

society's  statutory  powers 121 

misappropriation  of  funds  for,  may  be  re- 
strained  289,305 

right  of,  draws  with  it  right  to  improve 301 

debts  contracted  in,  ultra  vires  cannot  be  en- 
forced  302,307 

power  of  society  to  make,  and  hold 303-308 

by  directors  ultra  vires  a  fraud  on  society 305 

English  doctrine  as  to  society's  right  of,  under 

statute 305-307 

American  doctrine  as  to  same 308 

powers    of    building    association    as    to,    in 

Alabama 308n. 

and  dealing  in,  ground  for  forfeiture  of  charter  479 

by  stockholder  from  insolvent  society 485  n. 

method  of  obtaining  control  of,  beyond  statutory  allowance  303 
mortgaged  is  primary  fund  for  payment  of  debt... 365, 465 n.,  495 
statutes  referring  to  mortgages  of,  have  no  reference  to  chat- 
tel mortgages 4197k 

relation  of  value  of,  to  amount  loaned  on  mortgage  on 387 

equitable  lien  for  purchase-money  on,  in  hands  of  third 

parties 307 

conveyance  of,  after  expiration  of  charter 494 

tee  MORTGAGE  ;  PURCHASER  ;  TITLE  ;  VENDOR. 


644  INDEX. 

REBATE 

borrower  entitled  to  same  bonus  by  way  of,  on  repayment, 

as  withdrawing  member 162, 163,  430 

upon  premium  on  repayment  how,  computed  as  to  frac- 
tions of  years 166 

legality  of. 399-400 

of  interest  upon  computation  of  present  value  of  mortgage  375 
on  repayment  when  dues  cover  interest  or  re- 
demption money 427 

REBUILDING 

mortgagee  in  possession  may  add  cost  of,  to  mortgage 482 

RECEIPT 

of  dues,  estoppel  by 79, 176,431 

for  one  year's  rent  presumes  payment  of  prior  years' 211 

RECEIPT  BOOK 
see  PASS-BOOK. 

issued  by  society  is  evidence  in  spite  of  what 454 

how  proved 454 

RECEIVER 

right  of  and  grounds  for  appointment  of. 482-484 

what  bill  praying  for,  must  show 483 

who  may  ask  for  appointment  of. 488 

appointment,  of,  effect  on  borrower's  liabilities 502 

equivalent  to  dissolution 502 

RECIPROCITY 

in  building  association  scheme:  see  MUTUALITY. 

RECITAL 

in  mortgage  of  debt,  purpose  of. 365r* 

how  far  bond  shown  in  evidence  must  corres- 
pond with 51971 

estoppel  upon  married  women  by 71 

upon  member  and  mortgagor's  vendee  by : 

see  ESTOPPEL. 
RECOGNITION 

of  corporate  existence  estops  party  from  denying  it 513-515 

RECONVEYANCE  OF  STOCK 

when  borrower  cannot  demand,  after  sale  on  mortgage 429 

may  demand,  thereafter 431 

RECORD 

of  directors'  transactions :  see  MINUTES. 

of  society  is  evidence  of  relation  between  it  and  members...  446 

of  mortgage  not  notice  for  what  purpose 469 


INDEX.  645 

RECORDER 

liability  of,  for  search  of   encumbrances  when   not  re- 
moved by  act  of  society's  solicitor 245  n.,  251 ». 

error  of,  in  recording  mortgage,  when  does  not  defeat  lien..  433 
RECORDING 

of  articles,  &c.,  purpose  of. 62 

RECOVERY 
see  ACTIONS. 

of  usury  paid 359-361 

in  North  Carolina 361 

action  for,  must  be  brought  within  statutory  period  302 
barred  when  usury  merged  in  judgment  (see  NOTES)  366 
REDEEM 

see  REDEMPTION  ;  REPAYMENT. 
"  REDEEMED  " 

or  "bought  out,"  what  meant  by 13 

REDEEMING 

shares  by  society  a  mode  of  making  loans,  identical  with 
selling  money 42 

REDEMPTION  (see  REPAYMENT).. 152-172 

in  permanent  societies 46,  180 

costs  in  suits  for 179 

REDEMPTION  MONEY 

equivalent  to  interest 333,  338 

dues  representing,  cease  upon  repayment 373,  375,  376 

fines  for  default  in  payment  of. 415,  416 

borrower  repaying  entitled  to  deduction  of. 430 

REDUCTION 

see  CONTRIBUTION  ;  EXPENSES  ;  LOSSES  ;  SET-OFF. 

upon  repayment :  see  REPAYMENT. 

upon  premium :  see  ABATEMENT  ;  DEDUCTION  ;  PREMIUM  ; 

REMISSION. 
RE-ELECTION. 

to  same  office  creates  a  new  office,  and  sureties  on  old  bond 

are  not  bound 219 

REFEREES 

covenant  for  reference  to,  in  mortgage  valid 177  n. 

REFERENCE 

see  ARBITRATION. 
REFORMATION 

of  mortgage  when  allowed  (see  ERRORS  AND  OMISSIONS) 420 


646  INDEX. 

REFUSAL 

to  accept  legislative  modification  of  charter,  consequence  of    65 

to  transfer  stock,  ground  for  suit  for  damages 78, 

268  and  note,  448,  449 

of  members  to  pay  dues  does  not  relieve  others  or  bor- 
rowers  84,  499 

does  not  dissolve  society 473 

to  accept  proper  tender,  effect  of. 179,  437 

to  lend  funds  to  members  bidding  highest,  <fec.,  illegal 823 

REGULARITY 

necessity  and  enforcement  of,  in  payment  of  dues 93 

of  election  cannot  be  questioned  collaterally 192 

of  incorporation:  see  CHARTER;  COLLATERAL  INQUIRY;  IN- 
CORPORATION ;  NUL  TIEL  CORPORATION. 

REIMBURSEMENT  OF  SOCIETY 

claim  of  society  for,  for  default  in  dues,  &c 93 

by  borrower :  see  LOAN  OR  ADVANCEMENT  ;  REPAYMENT. 

REJECTION  OF  VOTES 

result  of  improper 188 

RELATION 

of  borrower's  stock -payments  to  his  debt  to  society 452 

of  amount  of  mortgage  to  value  of  real  estate  mortgaged..  387 
of  applicant's  stock-interest  to  amount  receivable  as  loan..  126 

RELEASE 

of  one  of  two  funds  without  actual  notice  of  subsisting 
right  to  compel  resort  to  that  fund,  effect  of. 469 

of  stock  pledged  with  actual  notice  of  second  mortgage  is 
satisfaction  of  first  mortgage  pro  tanto 469 

to  one  member,  when,  enures  to  benefit  of  all 489 

RELIEF 

courts  will  grant,  against  oppressive  fines  (see  FINES) 97 

but  not  from  contract  merely  on  account  of  hardship 386 

RE-LOAN 

premium  upon 384 

borrowing  money  for  purpose  of  making,  illegal 301 

REMEDIES 

see  ARBITRATION  ;  LEGAL  REMEDIES. 

statutes  changing,  are  valid 67 

for  refusal  to  transfer  stock  (see  REFUSAL) 448-449 

make  promised  loan 124,  245  n.,  267 

where  proceeds  of  sale  insufficient  to  cover  whole  sum  due  429 


647 

REMISSION 

of  premium 399  400 

of  fines  at  discretion  of  directors 418 

also  of  forfeitures.. 77,  99-102,418 

of  taxes  on  building  association  mortgages  binds  counties..  438 

REMOVAL 

see  AMOTION. 

REMUNERATION 
sfe  COMPENSATION. 

RENEWAL  OF  LEASE 

mortgagee  in  possession  may  make,  and  add  cost  to  mort- 
gage debt 432 

but  cannot  release  right  of. 432 

RENTS 

effect  of  receipt  for  last  year's,  in  full 211 

mortgagee  in  possession  cannot  charge  as  receiver  of. 432 

in  arrear,  mortgagee  in  possession  may  pay,  and  add  to 
mortgage  debt 432 

REPAIR 

covenant  to  keep  premises  in,  properly  inserted  in  mort- 
gage   423  », 

REPAIRS 

secretary's  contract  for  necessary,  binds  society 197 

mortgagee  in  possession  may  add  cost  of,  to  mortgage  debt  432 

REPAYMENT 

see  REDEMPTION. 

articles  should  provide  for 54  (5) 

borrower's  contract  as  to. 149,  371,  492 

not  contemplated  therein  before  society's  expiration.  ...153,  492 
effect  of:  does  not  discharge  borrower's  liability   on   his 

security  for  dues,  &c 88-90, 164,  372,  432 

after  decree  and  before  sale 89,  176 

after  suit  brought 176 

interest  ceases  upon 373,  375,  376,  427 

not  contemplated  by  borrower's  contract 153,  386,  430 

right  of  voluntary,  is  incident  to  membership 386 

how  basis  of,  is  that  of  principal  and  interest.. .326,  327,  331,  334 

method  of,  of  principal  in  building  association  loan 328,  371 

stipulation  for,  eo  nomine,  in  security,  effect  of 153, 157, 

331,  389 
when  renders  mortgage  void 420 


648  INDEX. 

REPAYMENT—  Continued. 

voluntary,  right  of.. 152,  386 

reasons  of  equity  and  policy  for 151, 158 

general  discussion  of. 152-172 

early  decisions  as  to 153 

principle  of. 153 

where  sum  and  time  are  fixed. ..153,  157 

right  of,  may  he  denied  until  fines,  &c.,  paid 155 

credits  allowable  to  borrower  upon 156 

under  provisions  of  articles 158-166 

English  decisions  as  to 159-164 

borrower  entitled  to  same  bonus  upon,  as  with- 
drawing investor 162, 163,  43C 

this  extends  to  deduction  of  redemption  money  430 

American  decisions  founded  on  English 165 

general  doctrines  as  to,  modified  by  statute...!65, 166 

rebate  upon,  under  statute  in  Pennsylvania 166 

provisions    for,    construed    favorably    to    bor 

rower 167,  168 

existing  at  time  of  loan  are  part 
of  the  contract  and  cannot 

be  varied 169 

terms  of,  by  special  arrangement,  when  binding 

on  society 169,  170 

are  mere  offer  of  compromise  171 
when  member  repudiating, 

may  benefit  by 172 

under  mortgage  deed 172 

upon  default,  terms  of. 175 

difference  between  voluntary  and 427 

upon  death  of  borrower  and  judicial  sale  of  premises 174 

in  permanent  and  serial  societies 180 

rule  for  computing  amount  due  on,  irrespective  of  rebates 

allowed  by  statute  or  rules 154-155, 158-164,  175, 

177,  336,  375,  424,  427,  428 

not  varied  by  practice  of  preliminary  accounts  on  fore- 
closure in  equity , 177 

is  the  same  at  law  as  in  equity 428 

upon  premature  dissolution  of  society 496-503 

upon  appointment  of  receiver 502 

in  Georgia... ! 384  n 

by  heirs  and  legal  representatives,  terms  of. 385 

where  proceeds  of  sale  insufficient  for,  parol  contract  to 
make  up  deficiency  due  on,  arises 429 


INDEX.  649 

REPEAL 

of  statutes  by  implication 34  (note  2),  35  (note  7) 

of  earlier  of  two  acts  passed  at  same  session  by  later 470». 

REPRESENTATIONS 

see  MISREPRESENTATIONS. 

REPRESENTATIVES 

terms  of  repayment  of  loan  by 385 

of  husband  of  feme  sole  member,  rights  of,  to  her  stock 444 

of  borrower  may  compel  application  of  stock  to  debt 459 

RESCISSION 

of  by-laws,  provision  to  be  made  for,  in  articles 54  (9) 

of  contracts  by  premature  dissolution  (see  RECEIVER).... 496-503 
none  by  mere  temporary  suspension  of  busi- 
ness   500 

of  obligations,  none  by  illegal  conduct  of  officers  or  society..  289, 

303,  305,  309 

nor  by  refusal  of  members  to  pay  dues 84,  499 

of  resolutions  to  prejudice  of  members  when  illegal 170 

of  special  terms  of  repayment  when  unlawful 290 

RESERVATION 

of  power  to  modify  and  repeal  charter,  effect  of. 65,  67 

upon    loans    strictly  confined    to   statutory  and    by-law 

limits 356,420 

see  LOANS  ;  MORTGAGE. 

RESIGNATION 

of  trustees  or  directors,  effect  of,  upon  titles,  &c 214,  233 

RESOLUTION 

when,  cannot  be  rescinded  to  prejudice  of  member 170,  290 

for  extra  compensation  to  director  when  not  binding 227 

mere,  may  make  binding  contract 237 

legality  of,  when  cannot  be  disputed  by  society 290 

RESPONSIBILITIES 

society  bound  to  observe  two  classes  of. 478 

RESPONSIBILITY 

see  LIABILITY  ;  PERSONAL  LIABILITY. 

RESTRAINTS 

see  BY-LAWS  ;  INJUNCTION  ;  OFFICERS. 

on  withdrawals  when  void 276 

on  officer's  right  of  voting  generally,  void 277 

upon  transfer  of  stock 447 


650  INDEX. 

KESULTS 

practical,  an  element  in  determining  legality  of  rules -7 1. 

849-850 
of  loans  or  advancements  in  ouilding  associations  387 

RETRO-ACTIVE 

and  expository  statutes 66 

efficacy,  by-laws  can  have  no,  to  prejudice  subsisting  rights..  279 

REWARD 

director  cannot  claim,  for  recovery  of  stolen  property 227  n 

RIGHTS 

of  members,  general  discussion  of. 112-180 

classification  of. 112 

to  vote 118,  148,  277 

to  notification  of  corporate  meeting 118 

as  corporators,  generally 113 

to  attend  corporate  meeting 113 

to  hold  more  than  one  share  of  stock 118 

to  have  access  to  corporate  books 114 

to  be  elected  to  and  hold  office 114, 148 

to  share  in  profits 114,  128,  129,  131  n 

to  account  of  profits,  when  accruing 128, 

129,  456,  457 

to  sue  society 114 

to  apply  for  dissolution  of  society 114 

to  compel  winding  up  in  equity 145 

are  based  upon  their  interests  as  shareholders..  147 

upon  forced  repayment 175 

to  proceed  against  unfaithful  officers..H4,  199,  213 
to  restrain  unlawful  acts  of  officers..H4  and  note,  309 
to  receive  loan,  nature  of..43, 115, 123, 126, 127,  444 
depends  upon  ability  to  give 

security 123 

being  highest  bidder,  to  receive  loan.,116,  122,  125 
applying  for  loan,  to  preference  over  outside 

investments 116-121 

to  enforce  such  right 121 

to  sue  for  refusal  of  promised  loan 124 

tee  LOANS  OR  ADVANCEMENTS. 

to  apply  to  chancery  to  prevent  departure 

from  lawful  business 809 

to  control  stock  pledged 450 

when  vested  cannot  be  disturbed  by  by-law...  278 


INDEX.  651 

EIGHTS—  Continued. 

of  members,  to  withdraw,  general  discussion  of  (see  WITH 

DRAWAL) 127-141,430 

absolute  under  statutes 132 

regulated  by  law  in  force  at  time 

of  incorporation 132 

cannot  be  regulated  contrary  to 

statute  or  charter 132 

nor  capriciously  denied  by  direct- 
ors   135 

borrower  surrenders 147,  430 

defeated  by  fines,  &c.,  standing 

against  member 155 

an  incident  to  membership 430 

of  borrowers,  general  discussion  of. 146-180 

being  pledgers  of  stock,  to  vote 113, 148,  450 

to  hold  office 148 

to  appropriate  stock-payments  to  debt,  after 

default 175, 176,  453-459 

to  make  tender  of  present  value  of  mortgage..  178 
not  affected   by   impossibility  of  enforcing 

terms  of  loan 76 

upon  forced  repayment 175 

of  voluntary  repayment  (see  REPAYMENT). .152, 386 
to   appropriate  stock-payments 

to  debt 154-156, 

159-164,  175,  176,  453-459 
may  be  denied  until  fines,  &c., 

paid 155 

construction   of  provisions  for, 

favors  member 167, 168 

as  existing  at  time  of  loan  cannot 
be  varied  without  borrower's 

consent 169 

an  incident  to  membership,  but 
not  secured  by  contract  of  loan  386 

of  pledgor  of  stock  to  vote 113, 148 

to  control  stock  pledged 148,  450 

of  withdrawing  members,  absolute,  to  share  of  profits,  when..  131  a 
rights  of  membership  cannot  be  exercised 

by 136 

to  proceed  to  judgment  against  society 137, 

141-148 


652  INDEX. 

RIGHTS— Con/mum. 

of  infants  and  married  women  as  members ,    70 

of  executor  or  administrator  of  deceased  member 76 

of  minority  to  insist  upon  continuance  of  society 173 

of  owner  of  stock  fco  sue  society  for  refusal  to  transfer 78, 

268  and  note,  448,  449 

of  salaried  officer  improperly  removed  to  sue  for  salary 229 

of  officer  to  vote  generally  cannot  be  restricted  to  canting 

vote •• 277 

once  vested  cannot  be  impaired  by  by-law.. 278 

of  society  to  maintain  suits  and  actions  (gee  ACTIONS)... 254-256 

to  reserve  interest,  involved  in  right  to  loan 322 

to  compromise  with  its  members 323 

to  take  security  involved  in  power  to  make  loan  419 

to  contract  to  effect  insurance  (see  POWERS) 

247  and  note,  383  n 
acquired  before  incorporation,  how  affected  by 

incorporation 520 

and  responsibilities,  society  bound  to  respect  and  observe 
two  classes  of. 478 

RULE 

for  computing  present  value  of  mortgage 154-155,  158-164, 

175,  177,  336,  375,  404,  426,  427,  428 

for  repayment  in  absence  of  by-law  and  statute  regula- 
tion  154,  155 

in  England 159-164 

in  America 154  n.,  165 

same  at  law  as  in  equity 428 

for  stating  preliminary  account  upon  foreclosure  in  equity 

(see  PRELIMINARY  ACCOUNT) 177 

to  be  observed  in  enactment  of  fines 406-414 

RULES  OF  SOCIETY  (ARTICLES  or  CONSTITUTION.) 

importance  of  drawing,  with  care 52 

framing  of 52 

adopted  as  basis  of  incorporation  binding  on  society 53 

what,  should  provide  for 54 

latitude  in  framing,  where  incorporation  is  by  patent  or 

special  act 59 

where  under  general  law 59 

purpose  of  recording 62 

how  far  binding  on  depositors 77 


INDEX.  653 

RULES  OF  SOCIETY— Continued. 

members  bound  to  obey 83,  271 

even  where  charter  obtained  by  fraud 305 

or    character,  &c.,  of  society   has   been    unlawfully 

changed 309 

made  after  notice  of  withdrawal  do  not  bind  withdrawing 

member 136  n. 

illegal,  are  void  and  ground  of  forfeiture  of  charter  (see 
BY-LAWS) 479 

"RULES  FOR  THE  TIME  BEING" 

submission  to,  how  construed 279 

RUMOR 

public,  is  not  notice  to  society 250 

RUNNING  OF  SOCIETY 
period  of:  see  DURATION. 

8. 

SALARY 

see  COMPENSATION. 

SALE 

see  JUDICIAL  SALE  ;  SHERIFF'S  SALE. 

statement  of  preliminary  account  as  basis  of,  on  foreclosure 

in  equity 177 

on  mortgage  of  infant  when  set  aside 70n, 

arrested  where  period  of  default  not  properly 

shown 258 

prevented  after  decree  by  payment  of  arrears 

found  by  preliminary  account 428 

when  mortgagee  in  possession  cannot  claim 

costs  of. 432 

by  attorney  not  named  therein  void 434 

who  may  be  appointed  trustee  in  mortgage  to  make,  on 

default,  &c 434 

of  stock  and  application  of  proceeds  to  borrower's  indebt- 
edness, who  may  claim  (see  MARSHALLING  OF  ASSETS)....  459 

SAVINGS  INSTITUTIONS 

building  associations  are  not  mere 119 

SCIRE  FACIAS  SUR  MORTGAGE 

writ  of,  must  show  default  and  present  right  of  action 258 

clause  for,  on  default,  in  married  woman's  mortgage  good..  316 
nature  of  proceeding  on 495 


654  INDEX. 

SCOTLAND 

funds  of  society  in,  liable  for  damages  to  member  injured 

by  officer's  violation  of  rules 213n 

sureties  in,  discharged  from  official  bond  by  neglect  of 

society 217  n. 

SEAL 

corporate,  president  custodian  of. 195,  23i 

society  may  authorize  any  person  to  affix 234 

what  is 234 

affixing  of. 234-237 

formalities  of  execution  of  instrument  under..234-236 

use  and  effect  of. 234,  235 

where  required 235,  237 

affixing  of,  to  instrument  makes  its  specialty 235 

effect  of,  on  negotiable  note 235 

appointment  of  agent  need  not  be  under 235,  242 

does  not  prove  iteelf. 236 

what  is  asufficient 236 

custody  of,  to  be  provided  for  in  rules 236 

authentication  of. 236,  237  n 

appointment  of  attorney  should  be  under 255 

necessity  and  significance  of,  in  corporate  con- 
tracts   237 

one  sufficient  where  several  persons  appointed  to  sell  land..  234  n 
SECOND  MORTGAGEE 

right  of,  to  marshal  assets 460-466,  468-469 

see  MARSHALLING  OF  ASSETS. 
SECONDARY  EVIDENCE 

admitted  on  failure  upon  notice  to  produce  primary 206 

see  EVIDENCE;  MINUTES;  PROOF. 
SECRETARY 

functions,  etc.,  of. 197 

contract  of,  for  necessaries  binds  society 197 

when  not  binding  on  society 197 

to  effect  insurance,  when  binding  on  society »247,  383  n, 

liability  of,  for  not  keeping  proper  minutes 205 

embezzlement  by 221 

of  unincorporated  society,  powers  of. 519 

see  MINUTES. 
SECURITIES 

inspection  of,  by  auditors  to  be  provided  for  in  articles 54  (7) 

prohibited  by  charter  not  void 288,  311  and  note. 

what,  society  may  take  for  loans 311 


INDEX.  65£ 

SECURITIES—  Continued. 

concentration  of,  and  stock  in  one  person  dissolves  society  476 

marshalling  of. 460-469 

of  two,  for  same  debt  each  must  bear  its  share 465  n 

of  unincorporated  society,  how  held .- 518 

SECURITY 

for  loans,  &c.,  to  be  provided  for  in  articles 54  (5) 

borrower's,  stands  for  dues,  &c.,  after  repayment  of  loan 

secured 88-90 

intended  to  be  for  society's  duration,  although 

otherwise  written 150  n.,  372,  432 

form  of,  does  not  affect  rule  as  to  repayment....  157 

joint,  of  self  and  outsider 382 

right  to  receive  loan  depends  upon  ability  to  furnish 116, 123 

discretion  of  society  as  to 123 

customary,  in  building  associations 123,  311,  380 

no  equities  arise  against  society  for  departing 

from 123,380-381 

society  may  take  any 380-381 

forbidden  by  charter  may  be  enforced  (see  SECURITIES). .311  and  note 

whether  society  may  advance  funds  on  personal 311 

of  non-members  may  be  taken  for  member's  debt 312 

of  wife  for  husband's  loan,  extent  of. 318 

joint,  of  member  and  outsider 382 

substituted  for  one  usurious  is  also  usurious 358 

right  to  take,  implied  in  power  to  loan 380 

its  nature  and  kinds 380-382 

assignment  of  stock  absolute  on  face  may  be  shown  to  have 

been  merely  as  collateral 380» 

rights  of  members  over  stock  pledged  as  collateral 450 

in  what  sense  mortgage  is  a  collateral 429 

see  MORTGAGE. 

for  faithful  performance  of  official  duties 215-219 

see  SURETIES. 
SELKIRK'S,  EARL  OF 

building  association  not  the  first  known 5n 

SEPARATE 

consent  of  directors  to  corporate  act,  legality  of. 206 

estate  of  wife  may  be  mortgaged  for  husband's  undertak- 
ings with  society 318 

SERIAL  SOCIETIES 

description  of. 47 

apportionment  ot  profits  among  the  series  in 47 


656  INDEX. 

SERIAL  SOCIETIES—  Continued. 

apportionment  of  profits  and  losses,  how  made 180n 

are  limited  as  to  duration ....    49 

yet  belong  to  class  of  permanent  societies 49 

repayment  of  loans  in 180 

rights  and  liabilities  of  members  in,  first  referable  to  series..  180 
accounts  of,  how  kept 180n 

SERIES 

apportionment  of  profits  among  the  series 47 

and  losses,  how  made 180n 

member  may  compel  settlement  of,  in  equity  when  stock 
reaches  par 489  n.,  490 

"SERVANT" 

meaning  of,  in  criminal  procedure 222 

SERVICE  OF  WRIT 

proof  of,  by  initials 257 

SERVICES 

members  owe  society  their  personal 83, 103,  226 

how  compelled  to  render 103 

compensation  for,  of  officers  and  agents  (see  COMPENSA- 
TION)   223-230 

before    organization,  society  not   chargeable  with,  aftcv 

incorporation 227 

where  assumpsit  for,  lies 227??. 

SET-OFF 

against  withdrawing  member's  claim,  losses  before  with- 
drawal are 105 

after  withdrawal  are  not 264 

losses,  to  be,  must  be  proved  by  society 264n. 

against  society,  withdrawal  balances  assigned  to  members 

are 138 

against  liability  for  corporate  debts,  member's  claim  as 

creditor  of  society  is 110 

against  withdrawal  balances  acknowledged  due  to  with- 
drawing members  and  assigned  to  others,  society  has  no.  266 

SETTLEMENT 

of  accounts  of  society  and  members,  none  until  dissolu- 
tion  128,  150,  153,  329,  336,  452,  456,  457 

tee  ACCOUNT;  PROFITS. 

of  affairs,  member  may  compel,  when  stock  at  par. 490-491 

power  of  society  to  make,  after  expiration  of 
charter 494 


INDEX.  657 

SHARE  OF  STOCK 

what  is,  in  law 441,  444 

SHAREHOLDERS 
see  MEMBERS. 

SHARES 

what  meant  by,  in  building  associations 12 

"par"  or  "paid-up,"  value  of 12 

"paid-up,"  in  permanent  societies 46 

in  serial  societies,  issue  of. 47,  48 

number  and  par  value  of,  to  be  set  forth  in  articles 54  (2) 

conditions  of  issue  of,  to  be  set  forth  in  articles 54  (3) 

amount  receivable  as  loan  or  advance  on,  to  be  set  forth 

in  articles 54  (5) 

no  restriction  upon  member's  right  to  hold  more  than  one, 

unless  by  statute,  &c 113  and  note. 

value  of,  for  withdrawal  (see  WITHDRAWAL) 130, 131 

for    application    to    indebtedness    (see   APPLICA- 
TION)  455-457 

assignment  and  transfer  of  (see  TRANSFER) 445-449 

borrower  may   make,  of,  subject  to  society's 

lien 148,450 

SHERIFF'S  SALE 

under  mortgage,  discharges  lien  thereof. 429 

remedy  where  proceeds  of,  insufficient  to  cover  whole  sum 

due 429 

purchaser  at,  whether,  may  set  up  usury  in  prior  mort- 
gage   363-365- 

SIC  UTERE  TUO,  UT  ALIENUM  NON  LAEDAS. 461 

SIGNATURE 

want  of  one,  required  to  certificate  of  incorporation,  fatal..  208 
defect  of,  in  certificate  does  not  avoid  charter  collaterally...  506 
of  president  and  secretary  should  accompany  affixing  of 

seal 235 

of  constitution  and  by-laws  a  mere  formality 83 

of  minutes  when  not  necessary  to  validity  of  directors'  acts  205 

SIGNIFICANCE 

of  seal  in  corporate  contracts 237 

of  stipulation  for  payment  of  dues,  &c.,  in  mortgages... 371,  372 

SIGNING 

of  constitution  and  by-laws  a  mere  formality 83 

of  minutes  w>,en  not  necessary  to  validity  of  directors' 
acts 205. 

IB 


658  INDEX. 

SMALL  AND  FREQUENT  PAYMENTS 

importance  of,  in  building  associations 829 

SOLICITOR 

functions,  duties  and  liabilities  of 214  n. 

unlawful  delegation  of  functions  by,  in  examining  title  (see 

RECORDER) 245  n. 

see  ATTORNEY. 

SOUTH  CAROLINA 

decisions  in,  touching  building  associations 38  n. 

cases  in,  on  theory  of  loans  or  advancements 847  n. 

SPECIAL 

act  of  legislature,  incorporation  by 57,  59 

criterion  of  legality  of  constitution  and 

by-laws  under 59 

arrangements  changing  value  of  stock,  effect  of. 171, 172 

for  withdrawal,  when  binding  on  society.,169,  170 
terms  of  repayment,  members  must  consent  to,  to  claim 

benefit  of. 171 

when    members    repudiating,    may 

have  benefit  of. 172 

cannot  be  forced  upon  members 171 

society  may  make,  with  borrowers....  323 

meeting,  what  business  to  be  transacted  at 182, 185 

what  is 182 

notice  of,  to  be  given  to  all  members 184 

duty  of  officers  in  calling 184 

regularly  called,  may  be  adjourned 185 

adjourned,  powers  of. 185 

of  directors 202 

SPECIALTY 

affixing  of  seal  makes  instrument  a 235 

SPECIFIC 

sum,  real  meaning  of  obligation  given  for  repayment  of.....  153, 

157,  421-422 
powers,  want  of,  as  claimed  under  charter  may  be  shown 

from  charter 510 

estoppel  against  party  denying  society's  right  to 
assume. 514 

SPECULATION 

impropriety  of  society's  engaging  in 120 

in  real  estate  (see  REAL  ESTATE) 804,  305n, 

in  stocks 821 


INDEX.  659 

STAMP-DUTY 

exemption  of  building  association  mortgages  from,  in  Eng- 
land, how  construed 43S 

6TARR-BOWKETT  SOCIETIES 

description  of. 45 

excessive  interest  on  loans  in 45 

STATE  (ATTORNEY-GENERAL). 

may  interfere  where  incorporation  irregular  or  fraudulent..    63 
may  forfeit  society's  charter  for  illegal  exercise  of  powers...  285, 

286,  325 
for  unlawful    departure  from 

powers  granted 325,  478 

alone  can  enforce  forfeiture  of  charter  for  misbehavior  of 

society 481,  508 

alone  can  impeach  corporate  existence 504 

see  NUL  TIEL  CORPORATION  ;  Quo  WARRANTO. 

STATED  MEETING 

see  DIRECTORS  ;  CORPORATE  MEETING  ;  MEETING. 

of  society 182 

directors 201 

STATES 

statutes  of  the  several,  relating  to  building  associations....  16-38 

reservations  legalized  in  the  several,  in  building  association 

loans 383 

STATUTE 

repeal  of,  by  implication 34  (n.  2),  35  (n.  7). 

constitution  must  conform  with  terms  of. 56 

incorporation  under  general ...56,  59-64 

powers  of  building  association  under 232 

spirit  of,  must  be  considered  in  determining 273 

charter  under  general,  not  conclusive  as  to  society's  powers,  291 

see  CHARTER. 

unincorporated  society  cannot  claim  benefit  of. 518 

STATUTE  OF  FRAUDS 

auctioneer  may  sign  memorandum  required  by,  to  bind 
purchaser 242 

BTATUTES 

necessity  of  comparison  of,  in  the  several  states 16-17 

of  the  several  states  relating  to  building  associations 18-38 

functions  of  legislature  and  courts  respectively  as  to 66 

retro-active  and  expository 66 

affecting  remedies  only 67 


660  INDEX. 

STATUTES—  Continued. 

what,  must  be  considered  in  passing  valid  by-laws 272 

curative,  constitutionality  of. 511 

regulating  building  associations,  unincorporated  societies 
cannot  benefit  by 518 

STATUTORY 

guarantee  of  right  and  terms  of  withdrawal,  imperative 131 

limitation  upon  funds  available  for  withdrawals 140-143 

regulations  of  loans  apply  to  members  only  (see  STRANGERS),  314 

terms  of  withdrawal,  force,  <fcc.,  of. 143 

repayment  override  other  rules 165,  166 

STAY  OF  EXECUTION 

discretion  of  court  as  to,  against  society  by  withdrawing 

member 137,  143,  264,  488  n. 

where  period  of  default  not  properly  averred 258 

STOCK  IN  BUILDING  ASSOCIATION 

definition  of. 441 

general  discussion  of. 441-470 

definition  of  shares  of 441-414 

must  be  all  subscribed  before  holding  individual  subscrib- 
ers, unless  waived 85,  441,  442 

member  entitled  to  hold  more  than  one  share  of. 113  and  note. 

member's  interest  in,  is  measure  of  loan  grantable  to  him..  126 
held  by  borrowing  member  may,  for  purpose  of  distribution, 

be  considered  as  sunk  and  extinguished 371 

expiration  of  charter  when,  at  par 473 

application  of,  to  debt  extinguishes  membership  of  bor- 
rower   431 

application  of,  to  debt  when  compelled  on  doctrine  of  mar- 
shalling of  assets 460-469 

see  MARSHALLING  OF  ASSETS. 

assignment  and  transfer  of. 445-449,  450 

of,  absolute  on  face  may  be  shown  to  have  been 

merely  as  collateral 380» 

effect  of  double 45$ 

concentration  of,  and  securities  in  one  person's  hands  dis- 
solves society 476 

forfeiture  of,  general  discussion  of. 99-102 

is  forfeiture  of  membership 102 

when  society  estopped  from  claiming 176 

does  not  take  place  until  declared 101, 176 

waiver  of. 77,  80,  99-102,  202,  418 

*>e  FORFEITURE. 


661 

STOCK  IN  BUILDING  ASSOCIATION— Continued. 

hypothecated,  purchaser  of,  cannot  compel  society  to  resort 

to  mortgage 459 

member's  rights  over 450 

lien  of  society  upon 87,  450 

maturity  of,  burden  of  proof  of,  when  on  borrower 260,  493  a. 

right  of  member  to  petition  for  winding  up 

on 490,491 

financial  condition  necessary  in  order  to 492 

difficulty  in  ascertaining  exact  period  of. 492 

misappropriation  of,  society's  liability  for 252 

"net  value"  of 449». 

owners  of,  must  procure  transfer  on  books 78 

ownership  of,  constitutes  membership  in  society 68 

of  feme  sole  member  at  common  law  upon 

marriage 72 

stock-book  primary  evidence  of. 78,  446 

as  between  claimants  may  be  determined  by 

possession,  &c 78,  447 

evidence  of. 78,446,447 

pledged,  purchaser  of,  cannot  compel  society  to  resort  to 

mortgage 459 

member's  rights  over 450 

property  in,  nature  of. 444 

subscription  for,  how  far  conditional ..85,  441 

when  only,  becomes  absolutely  binding..85,  441 

waiver  of  implied  condition  in 85,  442 

taxation  of. 470 

title  to,  borrowing  member  does  not  lose  his 148 

traffic,  society  cannot,  in  its  own 301,  323 

transfer,  owners  must  procure  on  books 78 

refusal  by  society  to  make,  action  for 78, 

268  and  note,  448-449 

cannot  be  made  whilst  member  in  arrears 87 

liability  to  contribute  to  losses  not  evaded  by 104 

cannot  be  made  by  withdrawing  member 136 

borrower  may  make,  subject  to  society's  lien 148 

and  assignment  of,  general  discussion  of... 445-449,  450 

value  of,  member  cannot  sue  at  law  for  paid-up 144,  265 

change  in,  effect  of,  on  borrower's  liability 171, 

172,  496-503  and  note. 

not  a  subsisting  claim  in  member  against  society 
before  winding  up 265 


662  IM»KX. 

STOCK  IN  BUILDING  ASSOCIATION— Continued. 

value  of  "net," 449n 

for  purpose  of  application  to  loan 455-457 

how  made  up 456,  457 

difficulty  in  ascertaining 456,  457,  490 

rights  of  members  when  stock  reaches  par 490-491 

financial  condition  necessary  to  produce  par 492 

withdrawal  of,  not  allowed  whilst  member  in  arrears 87 

stops  right  to  transfer 136 

works  surrender 136 

member  may  assign  balance  due  upon 136 

gee  APPLICATION  OF  STOCK  ;  ATTACHING  CREDITOR;  CAPITAL; 
CAPITAL    STOCK;    MARSHALLING  OP  ASSETS;    MERGER; 
SHARES;  TRANSFER;  WITHDRAWAL. 
STOCK-BOOK 

primary  evidence  of  membership 78,  446 

transfer  of  stock  must  be  made  on 78,  446 

society  need  not  look  beyond,  for  owners  of  stock 78 

action  against  society  for  refusal  to  enter  transfer  on 78, 

268  and  note,  448-449 

provisions  for  transfer  on,  how  construed 446 

see  CORPORATE  BOOKS 
STOCKHOLDERS 

see  MEMBERS. 
STOCK  INTEREST 

extent  allowable  to  any  individual  member 113 

of  member  is  basis  of  his  rights  (see  FORFEITURE) 147 

see  RIGHTS  OF  MEMBERS. 
STOCK-PAYMENTS  (see  DUES) 

installments,  subscriptions,  dues,  what  meant  by 12,  371 

amount  and  details  as  to,  to  be  set  forth  in  articles 54  (4) 

society  receiving,  when  estopped  from  denying   payer's 

membership 79, 176,  431 

duty  to  make,  not  removed  by  misbehavior  of  other  members    84 
nor  by  illegal  acts  of  society  or  officers..  ..172,  289, 

303,  305,  309 

nor  suspended  by  pendency  of  suit 91,  173,  263 

is  independent  of  obligations  as  borrower 372 

is  absolute  to  end  of  society's  existence 84,  160 

ceases  only  with  membership 84 

but  does  not  continue  after  dissolution 496 

enforced  upon  mortgage  after  repayment  of 
loan...  88 


INDEX.  663 

STOCK-PAYMENTS— Continued. 

duty  to  make,  regularly 9£. 

ceases  upon  forfeiture  of  stock 102 

are  to  be  made  in  cash  only 93  n.,  217,  401  n 

society  may  maintain  aasumpsit  for    85,  461 

need  not  give  notice  of,  when  due 86,  451 

in  arrears,  lien  on  stock  for 450,  4H7 

stipulation  for,  the  differentia  of  building  association  mort- 
gage   422 

covenants  as  to,  in  mortgage 423 

maybe  appropriated  to  liquidation  of  indebtedness 154-156, 

175-176 

but  are  not  directly  applied  thereto 452 

are  not  ipso  facto  payments  to  the  loan 374,  431,  440  n., 

452,  454-457,  462,  465 

not  even  in  unincorporated  societies 518 

see  MARSHALLING  OF  ASSETS. 

STOCKS 

speculation  in,  by  society  illegal 321 

STRANGER 

postponed  to  member  desiring  loan  or  advancement.. ..117,  121 

security  of,  may  be  taken  for  member's  liabilities 312 

and  of  member  jointly 382 

society  cannot,  without  distinct  authority,  lend  to 313 

estopped  from  setting  up  defense  of  illegality  of  loan 313 

and  persons  not  sni  juris,  loans  to 313-318 

what  society  can  recover  on  loan  to 313-316 

who  included  in  class  of. 316 

not  bound  by  rules,  &c.,  applicable  to  members  only 314 

how  society  ought  to  be  permitted  to  lend  to 314 

mere,  cannot  compel  application  of  stock  to  debt 459 

see  MARSHALLING  OF  ASSETS. 

mortgages  by,  when  exempt  from  taxation 439 

cannot  ask  for  appointment  of  receiver  for  insolvency.,.488-489 
nor  petition  for  winding  up  on  maturity  of  stock 491 

SUB-AGENTS 

contracts  of,  not  binding  on  society  where  delegation  of 
powers  to,  improper . 204  n, 

SUB-DIVISION 

of  dues  including  interest  or  redemption  money,  so  as  to 
impose  separate  fines  for  default,  illegal 416 

SUBMISSION 

to  by-laws  required 271 


664  INDEX. 

SUBROGATION  (see  MARSHALLING  OF  ASSETS) 461,  464 

SUBSCRIPTIONS  (we  DUES) 

stock  payments,  installments,  dues,  what  meant  by 12,  371 

to  stock  how  far  conditional 85,  441,  442 

deficient,  of  capital  stock  when  waived  as  a  defense 

288  and  note,  -I  l-J 

payable  in  cash  only 93  n.,  217,  401  n 

society  may  maintain  assumpsit  for 85,  451 

SUBSTANCE  OF  CONTRACT 

court  must  look  at 347,  353  n.,  358  n. 

SUBSTITUTION  OF  PARTIES 

necessary  where  society  expires  pending  the  suit 270 

SUCCESSION 

see  PERPETUAL  SUCCESSION. 
SUI  JURIS. 

loans  to  persons  who  are  not 316-318 

SUIT 

see  ACTIONS. 

right  and  liability  of  society  of  and  to 231,  254-256 

costs  in,  for  redemption  and  foreclosure.... 178 

SUM 

being  fixed  in  mortgage  for  repayment,  significance  and 

advantage  of. 153, 157 

"SUM  PAID  OR  ADVANCED" 

construction  of. 385 

SUPREME  POWER 

in  society  vested  in  corporate  meeting 181 

SURETIES 

on  official  bonds,  general  discussion  of. 217-219 

directors  may  become 216n. 

not  discharged  by  neglect  of  society  to  enforce 

its  rules 217 

except  in  Scotland 217  w, 

contract  between,  and  society 217 

measure  of  liability  of,  where  treasurer  receives 
mere  promises  to  pay  fines  and  dues,  instead 

of  cash 217  n. 

not  bound  where  officer's  election  void 218 

liabilities  of,  strictly  confined  to  terms  of  bond...  219 

when  held  on  continuing  guaranty 219 

of  treasurer  liable  if  he  receives  aught  but  cash  for  fines 
and  dues 217  and  note,  451  n. 


INDEX.  665 

SURETIES— Continued. 

of  borrowers  cannot  defend  on  ground  of  society's  abuse  of 

power  in  making  the  loan 288 

nor  because  borrower  allowed  to  hold  more 

than  maximum  number  of  shares 288 

may  set  up  usury  as  a  defense 363 

may  compel  application  of  stock  to  debt 459 

of  mortgage  debt  bound  by  its  terms 386 

against  liens  discharged  by  merger  of  mortgage  in  owner- 
ship as  to  losses  subsequent  thereto 219  n 

SURPLUS 

funds,   propriety  of  investment  of,   in   real   estate,  &c., 

depends  upon  society's  statutory  powers 121 

investment  of. 305  n 

assets,  borrowing  member  entitled  to  share  in 371 

accumulated,  what  is,  for  purpose  of  taxation 470 

SURRENDER  OF  FRANCHISE 

dissolution  by 474 

when  implied 476 

non-user  is  not  ipso  facto 476 

effect  of,  on  contracts  of  borrowers 496-503 

SURVEYOR 

functions,  &c.,  of. 214n 

must  look  to  corporate  funds  for  compensation 230 

SURVIVAL 

of  authority  between  agents 251 

SUSPENSION 

of  interest,  fines,  dues,  &c.,  none  by  bringing,  pendency  or 

discontinuance  of  suit 91,  178,  377,  418 

of  society,  what  amounts  to  total 476 

appointment  of  receiver  is  more  than 502 

of  society's  operations,  temporary,  does  not  abrogate  bor- 
rower's contracts 500 

T 
TAX  COLLECTOR 

see  COUNTY  ;  INJUNCTION  ;  TAXATION. 
TAXATION 

remedy  for  illegal,  against  collector 438 

building  association  mortgages,  legislature  may  remit,  on...  438 

liable  to 438,  440 

of. 438-440 

exemption  of,  from.. 439 


666  INDEX. 

TAXATION—  Continued. 

what  included  in  assessment  of  society's  propeuy  for 440 

on  capital  stock 470 

and  accumulated  surplus,  basis  of. 470 

TAXES 

covenants  to  pay,  properly  inserted  in  building  association 
mortgages 383,  423  n.,  432 

TEMPORARY 

loans  to  society,  legality  of. •. 301 

suspension  of  business  does  not  abrogate  borrower's  con- 
tracts   500 

TENDER 

of  money  due  on  building  association  mortgage,  what  is...  178, 

263,  437 

right,  terms,  and  effect  of. 178, 179,  263,  377 

refusal  of,  makes  society  liable  for  costs  and  stops  interest..  179 

after  suit  brought  must  be  with  accrued  costs 179 

society  entitled  to  decree  after  refusal  of. 179 

when  unnecessary 437 

see  COSTS  ;  DECREE  ;  INTEREST. 

TENNESSEE 

decisions  in,  touching  building  associations 38  n 

cases  in,  on  theory  of  loans  or  advancements 349 

TERMINATING 

society,  description  of. 41 

TERMINATION  OF  SOCIETY  (see  DISSOLUTION) 471-503 

time  and  manner  of,  to  be  provided  in  articles 54  (10) 

TERMINOLOGY  IN  BUILDING  ASSOCIATIONS 12-15,41 

"advanced"  member 13 

"  back-payments  ".'. 41 

"  bonus  " 13 

"  borrower  " 13 

"  bought  out " 13 

"  capital  stock  " 12 

"  dues  " 12 

"  installments  " 12 

"  investor  " 13 

"loan" 13 

"  par  or  paid-up  value  " 12 

"  premium  " 13 

"  redeemed  " 13 

"shares"...  12 


INDEX.  667 

TERMINOLOGY  IN  BUILDING  ASSOCIATIONS-Con/mttt<i. 

"  stock-payments  " 12 

"  subscriptions  " 12 

''  winding-up  " 14 

"  withdrawal  " 14 

"  withdrawal-notice  " 14 

descriptive  names  of  building  associations 15 

TERMS 

of  officers  :  see  OFFICERS. 

of  statute,  constitution  must  comply  with 56 

of  loan,  impossibility  of  enforcing  does  not  affect  rights  of 

borrower  as  member 76 

of  withdrawal 130, 131 

deviating  from  statute,  when  binding.....' 133 

of  repayment,  in  the  absence  of  statute  or  by-law  thereon.. 

154, 155 

cannot  be  varied  to  borrower's  prejudice 169 

see  LOANS  ;  REPAYMENT  ;  WITHDRAWAL. 

TERRE-TENANT 

whether  may  set  up  usury  as  defense  to  prior  encum- 
brance....  363-365 

cannot  set  up  usury  after  verdict  and  before  judgment 366 

see  JUNIOR  ENCUMBRANCER  ;  PURCHASER  ;  VENDEE. 

TESTIMONY 

see  EVIDENCE  ;  PAROL  ;  PROOF. 

TESTS 

by-laws  imposing  additional,  on  voters,  void 277 

THIRD  PARTIES 
see  STRANGERS. 

TIMBER 

when  mortgagee  in  possession  may  fell..... 432 

TICKET 

defeated  by  improper  rejection  of  votes,  court   cannot 

declare  elected 183 

containing  less  names  than  required,  good;  more,  void 190 

TIME 

for  payment  of  dues  to  be  set  forth  in  articles 54  (4) 

also  for  payment  of  interest 54  (5) 

also  for  nomination  and  election  of  officers 54  (6) 

also  for  annual  meeting 54  (8) 

for  repayment  of  loan  being  specified  in  security  does  not 

afiect  its  nature 157,  420-422 

specification  of,  effect  of. 332 


668  INDEX. 

TITLE 

choice  of:  see  NAME. 

to  stock  remains  in  borrower 148 

tee  TRANSFER. 

of  society's  real  estate  sometimes  vested  in  trustees.. 214 

property  always  so  vested,  if  unincorporated...  518 
vests    in    surviving   or  new   trustees   without 

assignment 214,  233 

so  also  upon  incorporation  of  unincorporated 

society 520 

in  examining,  of  real  estate,  solicitor  cannot  rely  on  a  copy 

of  a  will 214n 

charge  for  examining,  does  not  render  loan  usurious..214  n.,  368 

equitable,  mortgage  of. 419n 

mortgagee  in  possession  may  add  expenses  for  maintain- 
ing, to  debt 432 

of  property  of  unincorporated  societies  taken  by  trustees..  518 

effect  of  flaw  in,  on  rights  of  mortgagee  in  possession 432 

TORTS  AND  MISREPRESENTATIONS  OF  AGENTS 

when  society  liable  for 252 

ratification  of. 252 

innocent  party  suffering  by,  may  look  to  society,  though 

equally  innocent 252 

TRAFFICKING 

in  its  own  stock  is  illegal  in  society 301,  323 

TRANSACTIONS 

minutes  of  directors' 205 

TRANSFER  OF  STOCK 445-449 

must  be  made  on  corporate  books 78 

where  member  in  arrears,  may  be  refused 87,  155 

but  must  be  allowed  upon  payment  thereof. 447  n.,  (450  n). 

liability  to  contribution  cannot  be  evaded  by 104 

withdrawn  member  cannot  make 136 

borrower's  right  to,  subject  to  society's  lien 148 

action  against  society  for  refusal  to  make 268,  448-449 

mandamus  will  not  lie  to  compel 448 

method  and  formalities  of. 445 

by  power  of  attorney  signed  in  blank 445,  446 

on  corporate  books,  effect  of  rule  for 446 

is  merely  directory 446 

is  intended  for  protection  of  society....  446 

cannot  be  unreasonably  impeded  by  society 446 

society's  right  to  charge  fee  for 446 


INDEX.  GOS 

TRANSFER  OF  STOCK— Continual. 

not  entered  on  books  is  merely  an  equitable  assignment....  446 
but  good  against  all  but  innocent  purchasers...  446  n. 

and  good  against  attaching  creditor 446  and  note. 

holder  of  stock  may  demand,  on  books 447 

remedy  for  refusal  by  society 448 

may  be  prohibited  whilst  society  has  lien  on  stock 450 

by  borrower,  when  pledged  as  collateral,  to  third  party 
(double  assignment)  destroys  his  right  of  applying  it  to 

loan  contrary  to  assignee's  interests 458 

TREASURER 

functions,  &c.,  of. 196 

formerly  in  England  exercised,  by  trustees 196  n. 

of,  merely  ministerial 196 

warrants  on,  to  be  signed  by  president 195 

obliged  to  give  bond  196 

not  liable  for  moneys  lost  by  robbery,  &c 196 

cannot  recover  against  society  moneys  paid  without  war- 
rant for  illegal  purposes. 196 

is  not  personally  liable  for  payments  made  on  warrant, 

though  for  illegal  purpose. 196 

has  no  right  to  receive  aught  but  cash  for  dues  and  fines...   93  n., 

217,  401  n.,  451  n. 

measure  of  liability  of  sureties  of,  if  he  does 217  n. 

TRESPASS 

officer  de  facto  may  have,  against  others  claiming  to  be  a 

board  of  directors 192  n 

of  agent,  society's  liability  for  (see  TORTS) 252 

TRUST 

nature  of  relation  of,  between  society  and  its  membership..  128 
TRUSTEE 

when  corporation  regarded  as,  for  creditors Ill 

what  is  valid  appointment  of,  in  mortgage,  to  sell 434 

TRUSTEES 

not  properly  officers 194,  208 

now  generally  superfluous  and  discarded 194,  214 

in  England  formerly  had  functions  of  treasurer 196  n 

in  what  sense,  are  officers 208 

functions  of. 214 

conveyance  of  assets  to,  on  dissolution 494 

omission  to  state  names  of,  in  certificate,  does  not  avoid 

charter  collaterally 506 

in  unincorporated  societies,  functions  of. 518,  519 


670  INDEX. 

TRUSTEES—  Continued. 

directors  are  in  a  sense,  for  stockholders 207 

extent  of  liabilities  of,  as  trustees 209 

(N.  B. — Where  "trustee"  is  used  as  synonymous  with  "director," 
as  in  New  York,  see  DIRECTORS.) 


U 
ULTRA  VIRES 

(see  BORROWING  POWERS  ;  MISUSE  OF  POWER  OF  LENDING  ; 
PROHIBITION;  REAL  ESTATE;  SECURITY;  UNANIMOUS  CON- 
SENT; UNLA.WFUL  ACTS.) 
acts,  affecting  only  stockholders,  may  be  ratified. ..169,  232,  284 

assent  of  members  not  presumed  to...'. 181  n. 

of  agent's  powers,  effect  of. 245 

what  are 120,  288,  293-308,  310-318,  324 

render  society  liable  to  forfeiture  of  charter 285,  325 

in  taking  unauthorized  security,  effect  of. 288 

certain,  declared  to  be 323 

do  not  avoid  charter  collaterally 508 

arrangements  which  are,  when  binding  on  society 169, 170 

borrowing,  when  is 293-302 

by-laws  which  are,  do  not  avoid  charter  collaterally 507 

compromise  between  member  and  society  is  not 109,  323 

contracts,  of  agents,  when  void  and  when  voidable 247 

directors  jf  personally  liable  for,  cannot  ask  con- 
tribution from  members 307 

of  secretary  which  are,  do  not  bind  society 197 

of  directors  cannot  be  enforced  against  society...  198 

personal  liability  of  agent  or  officer  for 198,  284 

debts  contracted,  can  never  make  society  insolvent 489 

discount,  allowing  of,  on  premium,  not 399 

discounting  paper  is,  and  ground  of  forfeiture  of  charter...  479 

fixing  of  minimum  premium  is 394-397 

insurance,  contract  to  effect,  on  premises  mortgaged  is  not,  383 ji 

interest,  reservation  of,  on  loan  is  not 322 

lending,  what  is,  in  exercise  of  power  of. 310-321 

to  other  corporations  whether 319-321 

meaning  of  term  of. 282 

minimum  premium,  fixing  of,  is 394-397 

plea  of,  society  estopped  from  setting  up,  after  settlement 

with  borrower 169, 170 

meaning  of. 236 


INDEX.  67] 

ULTRA  VIRES— Continued. 

plea  of,  may  be  set  up  by  society  to  invalidate  instrument 

properly  executed 236 

who  may  set  up 285-292 

real  estate,  how  far  purchase  of,  is 303-308 

dealing  in,  is,  and  ground  of  forfeiture  of  charter.  479 

stock,  speculating  in,  is 321 

trafficking  in  its' own,  is 301,  323 

warrant,  payment  by  treasurer  upon,  for  purpose  which  is, 

creates  no  liability  in  him.. 196 

withdrawals,  rules  as  to,  which  are 132-133 

UNANIMOUS  CONSENT  OF  MEMBERS 

required  to  ratify  acts  of  directors  or  agents  ultra  vires 169, 

232,  284,  307  and  note 
ratines  acts  ultra  vires  as  between  society  and  directors  or 

agents 307 

whether  premature  dissolution  requires 474 

to  dissolution  may  be  inferred.. 476 

UNAUTHORIZED 

acts  of  agents  do  not  bind  society 245 

contracts  of  secretary  do  not  bind  society 196 

of  agents,  when  void  and  when  voidable 247 

UNCERTAINTY 

an  element  in  building  association  loan 336 

in  rules  relating  to  fines  construed  in  favor  of  member 

407-409,  411 

in  provisions  for  repayment,  likewise 167,  168 

in  building  association  mortgage  (or  bond)  does  not  make 
it  void... 424 

UNINCORPORATED  BUILDING  ASSOCIATIONS 

general  discussion  of. 517-521 

are  partnerships 517 

powers  of... 517-518 

government  of. 519 

loans  in 341,  344,  345,  351,  355,  356,  518 

fines  and  premiums  not  recoverable  in 518 

contracts  of,  not  aided  by  statutes 518 

nor  by  subsequent  incorporation 518,  520 

incorporation  of,  effect  on  rights,  property,  &c.,  previously 

acquired 520 

by  existing  constitution  and  by -laws.... 58, 521 

UNITY  OF  CORPORATE  EXISTENCE...  ..  239 


672  INDEX. 

UNLAWFUL 

acts  of  officers,  right  of  members  to  restrain  (see  DIRECTORS; 

OFFICERS) 114 

of  society,  when  ground  of  forfeiture  of  charter 323,  825 

departure  from  legitimate  functions,  effect  of,  on  corporate 

existence  and  obligations  of  members 309 

practices  of  society,  what  are 120,  283, 

293-308,  310-818,  323.  324 

purposes  of  building  associations 118 

UNMARRIED  WOMEN 

see  FEME  SOLE. 
UNREASONABLE 

bargain,  society  has  right  to  make 109  n.,  823  n 

by-laws :  see  BY-LAW. 

restraints  upon  transfer  of  stock  improper 447 

UNWISE  BARGAIN 

right  of  corporation  to  make 109  n.,  323  n 

USAGE 

where  admitted  as  explanatory 188 

and  custom  when  sanctioning  delegation  of  authority  by 
agent 251 

immemorial,  cannot  be  appealed  to  in  building  associa- 
tions   271  n. 

see  CUSTOM  ;  CUSTOMARY. 

USE  OF  COMMON  SEAL  (see  SEAL) 234 

USER 

gives  corporation  no  exclusive  property  in  a  name  merely 

descriptive  of  locality 51 

USUAL  SECURITY 

in  building  associations  (see  CUSTOMARY) 123,  311,  380 

USURY 

definition  of. 358 

general  discussion  of. 358-368 

charges  for  negotiation  of  loan  and  examination  of  title  do 

not  constitute 214  n.,  308 

exception  to  this  rule  as  to  corporation  officers 368 

is  no  defense  to  mortgage  on  ejectment 311  n. 

where  no  defense 311  n.,  360,  361 

cannot  be  set  up  by  deceased  married  woman's  next  of  kin,  317 

in  substance  of  contract  taints  its  every  form 347,  349, 

353  n.,  358  and  note. 
In  premium  left  to  jury 338,  344,  846 


INDEX.  673 

USUHY— Continued. 

in  building  association  loan  cannot  be  ascertained  without 

account  of  losses  and  expenses 346 

theory  of  partnership  dealing  does  not  excuse 346  n.,  347  n. 

court  must  analyze  transaction  to  find 347,  353  n.,  358  n. 

Lord  Coke's  caveat  as  to 349 

taints  security  in  hands  of  bonafide  holder 358 

may  become  an  element  in  building  association  loan 358 

effect  of,  on  security 358 

paid  voluntarily  may  be  recovered 359,  360 

embraced  in  final  settlement  cannot  be  recovered 360 

merged  in  judgment  cannot  be  recovered 366 

after  verdict  and  before  judgment,  when,  cannot  be  ob- 
jected to 366 

cannot  be  recovered   by  borrowing   member   in   North 

Carolina 361 

action  for  recovery  of,  must  be  brought  within  statutory 

period 362 

when  a  fraud  upon  creditors,  may  be  set  up  as  defense 363 

who  may  set  up,  in  security  as  a  defense 363-365 

whether  second  mortgagee  may  set  up,  in  first  mortgage..363-366 

when  a  personal  defense 358,  363,  364 

when  a  general  defense 364-365 

cases  on,  collected 364n. 

not  an  objection  to  sale,  but  arises  on  distribution 367 

plea  of,  must  conform  to  statute 367 

purchaser  subject  to  building  association  mortgage  cannot 
complain  of. 386  n, 

V. 
VACANCY 

filling  of,  in  board  of  directors  or  among  officers,  power  of 

directors  as  to 19& 

in  board  of  trustees  requires  no  assignment  of 

titles 214 

officer  filling,  extent  of  liability  of  sureties  for 219- 

VALIDITY  OF 

agreement  of  all  members  to  dissolve 172  n.,  475 

by-laws,  dependent  upon  what 281 

charter  cannot  be  inquired  into  collaterally 63,  475  n., 

481,  504-508,  5f2,  >JS 

compromise  between  society  and  members 109,  323  (169, 170) 

2s 


•674  INDEX. 

VALIDITY  OF— Continued. 

constitution  dependent  on  what,  where  incorporation  by 

patent,  &c 66,  59 

contract,  imprudent,  of  corporation 109 n.,  323n. 

how  far  dependent  on  keeping  of  minutes 205 

assented  to  by  directors  separately 206 

mortgage  for  payment  of  dues,  &c 424 

official  bonds,  certain 216 

see  AGENT  ;  BY-LAW  ;  CONTRACT  ;  MEETING  ;  MORTGAGE. 
proof  of  service  by  endorsement  thereof  by  initials  on  writ..  257 

VALUE 

of  shares  for  withdrawal 130-131 

of  mortgage  for  dues,  &c.,  present 154-155 

see  PRESENT  VALUE  ;  MORTGAGE  ;  REPAYMENT. 

of  stock,  effect  of  change  in,  on  borrower 171, 172,  (496-503) 

not  a  subsisting  claim  in  member  against  society 

before  winding  up 144,  265 

for  purpose  of  application  to  loan 455-457 

how  made  up 456,  457 

VARIANCE 

of  terms  of  repayment  after  loan  made,  illegal 169 

between  date  and  consideration  of  bond  as  recited  in  mort- 
gage and  as  shown  in  evidence 245  n.,  519  rv 

between  real  name  of  society  and  name  in  bond  and  bill 
(see  MISNOMER) 257 

VARIETIES 

of  building  associations 41-47 

of  forms  of  mortgage  used  in  building  associations 421 

VENDEE 

whether,  may  set  up  defense  of  usury  to  prior  encum- 
brance  363-365 

»ee  PURCHASER. 

VENDOR 

may  enforce   lien   for   purchase-money  on  property  in 
hands  of  third  parties  who  paid  full  consideration 307 

VERDICT 

terre-tenant  cannot  set  up  usury  after,  and  before  judgment,  866 

VESTED  RIGHTS 

cannot  be  impaired  by  by-law  (see  OBLIGATION  OF  CON- 
TRACTS)    278 


INDEX.  675 

VESTING  OF  TITLE 

upon  resignation  or  death  of  trustees  or  directors 233 

upon  incorporation  of  unincorporated  society 520 

VICE-PRESIDENT 

functions,  Are.,  of 195 

VIRGINIA 

statutes  in,  relating  to  building  associations 35 

decisions  in,  relating  to  same,  collected 35  n. 

cases  in,  on  theory  of  loans  or  advancements 343 

VOLENTI  NON  FIT  INJURIA 

applied  to  parties  to  usurious  loan 859 

VOLUNTARY 

payment  of  usury  not  a  bar  to  recovery 359 

and  forced  repayment,  difference  between  terms  of. 427 

surrender  of  franchise,  dissolution  by 474 

when  inferred 476 

repayment :  see  RKPAYMKNT. 
withdrawal :  see  WITHDRAWAL. 

VOLUNTARY  ASSOCIATION 

incorporation  by 61 

VOLUNTARY  BUILDING  ASSOCIATIONS 
see  UNINCORPORATED  SOCIETIES. 

VOTE 

right  to,  member's 113 

each  member  entitled  to  one 113,  187  n, 

origin  and  reason  of  this  rule 113 

right  of  pledger  of  stock  to 113,  450 

borrower  to 118 

mere,  may  create  binding  contract 237 

by-law  giving,  or  restraining  to  casting,  when  void 277 

creating  new  and  additional  tests  and  qualifications 

of  right  to,  void 277 

VOTER 

see  MEMBERS. 

VOTES 

number  each  shareholder  entitled  to,  to  be  set  forth  in 

articles 54  (6) 

acceptance  of  illegal,  effect  of,  upon  election 188 

rejection  of,  effect  of  improper 188 

majority  of,  though  minority  of  meeting,  elects 189 


676  INDEX. 

w. 

WAIVER 

of  forfeiture,  right  of. 79 

must  be  clearly  act  of  society 80 

of  condition  as  to  capital  being  all  subscribed,  what  is,  and 

effect  of. 85,  288  and  note,  442 

of  defects  in  notice  of  meetings 184 

of  rule  as  to  maximum  of  shares  to  be  held  by  any  member..  288 

WANT  OF  FUNDS 

when  no  defense  against  withdrawing  member 139 

WARRANT 

payment  by  treasurer  without,  for  purposes  ultra  vires  can- 
not be  recovered 196 

necessity  of,  on  treasurer  for  disbursement  of  corporate 

funds 196 

on  treasurer  to  be  signed  by  president 195 

drawn  by  president  not  a  negotiable  instru- 
ment   264  r* 

WARRANTY 

directors  acting  ultra  vires  may  be  held  on  an  implied,  of 

society's  power  to  do  the  act 198,  28t 

WASTE 

liability  of  directors  to  account  for,  of  corporate  funds 212 

when  mortgagee  in  possession  may  commit 432 

WEEKLY 

periodical  payments  may  be 374 

WEST  VIRGINIA 

statutes  in,  relating  to  building  associations 36 

WIFE 

see  MARRIED  WOMEN. 
WILL  OF  LEGISLATURE 

how  expressed  as  to  creation  of  corporations 273 

is  supreme  over  purposes  defined  in  charter,  <fec 480 

WILLFUL  MISCONDUCT 

directors  liable  for 209 

WINDING-UP 

see  COURT  ;  DISSOLUTION  ;  EQUITY. 

what  is  meant  by 14 

when  members  may  apply  to  court  for  purpose  of..H4,  490-491 
member  must  either  await,  or  withdraw  to  get  value  of  his 
stock 145,268 


INDEX.  677 

WINDING-UP—  Gmtinued. 

agreement  of  members  to,  is  valid 172  n.,  475 

binds  assignee  of  consenting  member 172  n.,  475 

building  association  mortgages  not  assets  for 440,  492 

effect  of  arrival  of  period  for f. 472-473 

of  insolvent  society,  proper  method  of. 485-487 

when  borrower  cannot  petition  for 491 

petition  to  court  for,  must  proceed  from  member  as  such : 

see  CREDITOR 491 

what  financial  condition  petition  for,  must  show 492 

settlements  incident  to 494 

WISCONSIN 

statutes  in,  relating  to  building  associations 37 

WITHDRAWAL 

what  is  meant  by 14 

provisions  for,  to  be  made  in  articles 54  (4) 

cannot  be  forced  upon  investors  by  borrowers 173 

balances  due  upon 266 

assignment  of. 136 

rights  of  assignee  of. 136, 138 

bonus  upon,  may  be  claimed  by  borrower  voluntarily  re- 
paying  162, 163 

claims  of  member  upon,  liable  to  defalcation  for  losses  and 

expenses 105 

even  where  losses  not  yet  ascertained 105 

but  not  accruing  after  notice  of  withdrawal 264 

what,  member  may  make,  upon.. 128,  129-131 

dissolution  by,  of  members 498 

effect  of,  is  surrender  of  stock 136 

notice  of,  what  meant  by 14 

effect  of,  on  membership  and  duties  thereof 108  n., 

136  n.,  (264) 

right  of,  is  incident  to  membership 430 

belongs  to  all  members 503 

objections  to,  and  justification  of. 127 

equitable  aspect  and  importance  of. 127 

does  not  involve  account  of  profits 128,  129 

cannot  be  capriciously  denied  by  directors 135 

is  defeated  by  society's  lien  for  arrears  due 87,  155 

becoming  borrower  (surrender) 147, 

155,  430 

terms  of  mortgage 430 

how  affected  by  statutory  limitation  upon  funds 

devoted  to....  ...140-143 


678  INDEX. 

WITHDRAWAL— Om*tnu«rf. 

design  of  statutory  limitation  of  funds  devoted  to 143 

terms  of,  statutory,  nature,  design  and  effect  of. 131 

are  those  in  force  at  incorporation 132 

charter  and  by-law  provisions  varying, 

are  void 132 

extra-statutory,  when  binding  on  society 133,  170 

when  regulated  by  charter  or  by-law 134 

rules  as  to,  construction  of. 134 

special,  when  cannot  be  rescinded 170 

value  of  shares  for  purpose  of. 130,  131 

WITHDRAWAL  BALANCES 

nature  of,  and  presumption  as  to 266 

assignment  of. 136,  266 

rights  of  assignee  of,  though  a  member 137, 138,  266 

WITHDRAWAL  NOTICE 

marks  cessation  of  membership 108n. 

member  not  bound  by  new  rules  after  giving 136 

liable  for  losses  accruing  after 264 

WITHDRAWING  MEMBERS 

when  must  be  allowed  some  share  of  profits 131  n. 

must  observe  rules,  &c.,  prescribed 132,  264,  430 

rule  for  competition  between,  for  priority  of  payment  of 

claims  of,  when  void 132,  276 

need  not  show  cause 132 

rights  of,  regulated  by  statute  under  which  society  formed..  132 

after  notice,  become  mere  creditors 136, 138 

cannot  transfer  stock 136 

may  assign  balances  due,  even  to  other  members 136, 138 

may  proceed  to  judgment  against  society 137,  141-143,  264 

execution  by,  against  society,  discretion  of  court  as  to...l38,  143 

society  must  keep  funds  available  for 189 

not  affected  by  losses  after  withdrawal-notice 264 

rules  passed  thereafter 264 

suing  for  claims,  must  show  compliance  with  statute  and 

regulations 264 

entitled  to  priority  on  distribution  of  insolvent  society's 

assets 486 

WITNESS 

see  EVIDENCE. 

WOMEN 

see  FEME  SOLE;  MARRIED  WOMEN. 


INDEX.  679 

WORKINGS 

description  of  general,  of  building  association  scheme 8-11 

WRIT 

endorsement  of  proof  of  service  on,  by  initials  merely 257 

of  entry,  society  may  maintain  after  illegal  cancellation  of 

mortgage:  see  ENTRY 519 

of  injunction :  see  INJUNCTION. 

of  mandamus :  see  MANDAMUS. 

of  quo  wavranto :  see  Quo  WARRANTO. 

of  scire  facias :  see  SCIRE  FACIAS. 

WRITTEN  AUTHORITY 

not  needed  to  show  appointment  of  agent 242 

See  AGENT. 


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UNIVERSITY  OF  CALIFORNIA 


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